Earningspershare每股收益.docx

1、Earningspershare每股收益Earnings per shareEarnings per share (EPS) is the monetary value of earnings per each outstanding share of a companys common stock.In the United States, the Financial Accounting Standards Board (FASB) requires companies income statements to report EPS for each major category of t

2、he income statement: continuing operations, discontinued operations, extraordinary items, and net income.Calculating EPSPreferred stock rights have precedence over common stock. Therefore, dividends declared on preferred shares are subtracted before calculating the EPS. When preferred shares are cum

3、ulative, the annual dividends are deducted whether they have been declared or not. Dividends in arrears are not relevant when calculating EPS.Earnings per share (basic formula)Earnings per share (net income formula)Earnings per share (continuing operations formula)References WikipediaEarning per sha

4、re, also called net income per share, is amarket prospect ratiothat measures the amount of net income earned per share of stock outstanding. In other words, this is the amount of money each share of stock would receive if all of the profits were distributed to the outstanding shares at the end of th

5、e year.Earnings per share is also a calculation that shows how profitable a company is on a shareholder basis. So a larger companys profits per share can be compared to smaller companys profits per share. Obviously, this calculation is heavily influenced on how many shares are outstanding. Thus, a l

6、arger company will have to split its earning amongst many more shares of stock compared to a smaller company.FormulaEarnings per share or basic earnings per share is calculated by subtracting preferred dividends from net income and dividing by the weighted average common shares outstanding. The earn

7、ings per share formula looks like this.Youll notice that the preferred dividends are removed from net income in the earnings per share calculation. This is because EPS only measures the income available to commonstockholders. Preferred dividends are set-aside for the preferred shareholders and cant

8、belong to the common shareholders.Most of the time earning per share is calculated for year-end financial statements. Since companies often issue new stock and buy back treasury stock throughout the year, the weighted average common shares are used in the calculation. The weighted average common sha

9、res outstanding is can be simplified by adding the beginning and ending outstanding shares and dividing by two.AnalysisEarning per share is the same as any profitability or market prospect ratio. Higher earnings per share is always better than a lower ratio because this means the company is more pro

10、fitable and the company has more profits to distribute to its shareholders.Although many investors dont pay much attention to the EPS, a higher earnings per share ratio often makes the stock price of a company rise. Since so many things can manipulate this ratio, investors tend to look at it but don

11、t let it influence their decisions drastically.ExampleQuality Co. has net income during the year of $50,000. Since it is a small company, there are no preferred shares outstanding. Quality Co. had 5,000 weighted average shares outstanding during the year. Qualitys EPS is calculated like this.As you

12、can see, Qualitys EPS for the year is $10. This means that if Quality distributed every dollar of income to its shareholders, each share would receive 10 dollars.Understanding Earnings Per ShareOne of the challenges of evaluating stocks is establishing an “apples to apples” comparison. What I mean b

13、y this is setting up a comparison that is meaningful so that the results help you make an investment decision.Comparing the price of two stocks is meaningless as I point out in my article“Why Per-Share Price is Not Important.”Similarly, comparing the earnings of one company to another really doesnt

14、make any sense, if you think about it. Using the raw numbers ignores the fact that the two companies undoubtedly have a different number of outstanding shares.For example, companies A and B both earn $100, but company A has 10 shares outstanding, while company B has 50 shares outstanding. Which comp

15、anys stock do you want to own?It makes more sense to look at earnings per share (EPS) for use as a comparison tool. You calculate earnings per share by taking the net earnings and divide by the outstanding shares.EPS = Net Earnings / Outstanding SharesUsing our example above, Company A had earnings

16、of $100 and 10 shares outstanding, which equals an EPS of 10 ($100 / 10 = 10). Company B had earnings of $100 and 50 shares outstanding, which equals an EPS of 2 ($100 / 50 = 2).So, you should go buy Company A with an EPS of 10, right? Maybe, but not just on the basis of its EPS. The EPS is helpful

17、in comparing one company to another, assuming they are in the same industry, but it doesnt tell you whether its a good stock to buy or what the market thinks of it. For that information, we need to look at some ratios.Before we move on, you should note that there are three types of EPS numbers: Trai

18、ling EPS last years numbers and the only actual EPS Current EPS this years numbers, which are still projections Forward EPS future numbers, which are obviously projectionsThe articles in this series:3 Ways How to Calculate Earnings Per ShareThree Methods:Basic Earnings Per Share CalculationWeighted

19、Earnings Per Share CalculationUsing Earnings Per ShareEarnings per share (EPS) is a commonly used phrase in the financial world. Earnings per share represents a portion of a companys profit that is allocated to one share of stock. Therefore, if you were to multiply the EPS by the total number of sha

20、res a company has, youd calculate the companys net income. EPS is a calculation that many people who watch the stock market pay attention to.Method 1 of 3: Basic Earnings Per Share Calculation1. 1Locate the companys net earning or net income from the previous year.This information can be found on mo

21、st financial webpages, or on the companys website. Using the companys net earnings or income as the primary number in the calculation is the most basic way of determining EPS. For example, say you want to calculate the EPS of Microsoft based on its net income. A quick browse of Microsofts website te

22、lls you that in 2012, the companys net income was almost $17 billion.1 Be careful not to mistake a companysquarterlynet income with theirannualnet income. Quarterly profit is calculated every three months, whereas annual profit is calculated every 12 months. Mistaking a companys quarterly net income

23、 for their annual net income will cause your calculation to be roughly four times smaller. 2Figure out how many shares are outstanding.How many total shares does a company have on the stock exchange? This information can be collected by visiting a financial website and locating the companys informat

24、ion. Again, lets continue with the example of Microsoft. As of the time of writing, Microsoft has 8.33 billion shares outstanding.2 3Divide the net income by the number of shares outstanding.Taking Microsofts vitals as our example, wed divide $17 billion by 8.33 billion and come away with a basic EP

25、S of 2.3 Take another basic example. Lets say a bocce ball company has a net income of $4 million and 575,000 shares outstanding. We divide $4 million by 575,000 and come up with an EPS of 6.95.Method 2 of 3: Weighted Earnings Per Share Calculation1. 1Modify the basic EPS calculation slightly to arr

26、ive at the weighted earning per share calculation.Weighted EPS is a more accurate calculation because it takes into account any dividends that the company issues to shareholders. However, this formula is more complex than the basic earnings per share calculation or the reporting term, so it is not u

27、sed quite as often even though it is more accurate.2. 2Locate the companys dividends on preferred stocks.A dividend is an amount of money paid out to stockholders often quarterly from the companys profit. For the sake of example, lets take Apple as the company were trying to arrive at a calculation

28、for. In 2012, Apple announced that it would pay a $2.5 billion dividend quarterly, starting in Q3.4That amounts to roughly $5 billion in dividends over the course of the year. 3Take the companys net income and subtract the dividends on preferred stock number.Using Apple as an example, a quick search

29、 reveals that in 2012, Apple recorded $41.73 billion in net income.5Subtract $5 billion from 41.73 to arrive at $36.73 billion. 4Divide the difference by the average number of outstanding shares.Apples net income minus their dividend in 2012 was $36.73 billion. Divide this amount by the amount of sh

30、ares outstanding, 934.82 million, to arrive at a weighted EPS of roughly 39.29.Method 3 of 3: Using Earnings Per Share1. 1Use EPS as a barometer for a companys profitability.EPS clues investors and potential investors in to a companys profitability.6A higher EPS generally signals a more robust compa

31、ny, profit-wise. Like most numbers, however, EPS should not be looked at in isolation. Theres no fixed EPS number above which a companys stock should be bought and below which its stock should be sold. Its important to look at a companys EPSin relation toother companies.2. 2Know that more than other

32、 calculations, EPS is probably the single most important factor in driving a companys stock price.7Looking at a companys EPS is more valuable than looking at their profit because EPS puts a companys profit into perspective. (A huge company generating $1M net income isnt very impressive; a tiny company generating $1M net income is.) EPS is also integral in evaluating a companys Price to Earnings ratio, or P/E.3. 3