Financial Metrics

Earnings Per Share (EPS) #

EPS is a financial metric that shows the amount of earnings that a company has generated for each outstanding share of its common stock. It is calculated by dividing a company’s net income by the total number of outstanding shares of its common stock. The EPS figure can help investors evaluate a company’s profitability and growth potential. A higher EPS generally indicates a more profitable company.

Example: If a company has a net income of $1 million and 500,000 outstanding shares of common stock, then its EPS would be $2. This means that the company has generated $2 of earnings per share of its common stock.

Price-to-Earnings Ratio (P/E Ratio) #

The P/E ratio is a financial metric that compares a company’s stock price to its earnings per share (EPS). It is calculated by dividing the current market price of a share of a company’s stock by its EPS. The P/E ratio can be used to evaluate a company’s valuation, growth potential, and profitability. A higher P/E ratio generally indicates that investors are willing to pay more for each dollar of earnings generated by the company.

Example: If a company’s stock is trading at $100 per share and its EPS is $5, then its P/E ratio would be 20. This means that investors are willing to pay $20 for each dollar of earnings generated by the company.

Dividend Yield #

The dividend yield is a financial metric that shows the amount of dividends paid out by a company relative to its stock price. It is calculated by dividing the annual dividend payment per share by the current market price per share. The dividend yield can be used to evaluate a company’s ability to generate income for its shareholders through dividends.

Example: If a company pays an annual dividend of $2 per share and its current stock price is $50 per share, then its dividend yield would be 4%. This means that the company is paying out $2 in dividends for every $50 invested in the stock.

Market Capitalization #

Market capitalization is a financial metric that shows the total value of a company’s outstanding shares of common stock. It is calculated by multiplying the current market price per share by the total number of outstanding shares of common stock. Market capitalization can be used to evaluate a company’s size, growth potential, and risk.

Example: If a company has 10 million outstanding shares of common stock and its current market price per share is $50, then its market capitalization would be $500 million.