educatief

Key data: evolution Earnings per Share

Profit is made by fully exploiting a business. Earnings growth depicts the value of a business and its management. Earnings per share (EPS) are the profit after tax, divided by the number of shares.

We use current EPS because it gives a better picture of how a company is growing. Current earnings do not take exceptional results into account and therefore follow a smoother course. In order to obtain an even clearer insight into the growth of a company any elements that may muddy the waters of the future picture of the company are also excluded from the current result. This gives us a valuable tool with which to estimate the future results of a company.

The value of a stock is mainly determined by future EPS. The company’s management has the responsibility of realizing future EPS. The management utilizes the business’ resources in its effort to do so. These resources comprise of the human potential as well as the potential of the business’ assets. Know-how is often a particularly important resource which management can use to drive growth.

Stock price increase can deviate from earnings growth for years. Macro-economic and psychological factors are the main reasons that stock prices temporarily increase at faster or slower rates. The most influential factor is interest rates. In times of falling interest rates the stock price usually increases faster than EPS whereas in times of increasing interest rates the price usually increases at a slower pace than EPS. A low interest rate warrants a high Price/Earnings Ratio (P/E Ratio). In a high interest rate warrants a low P/E Ratio.

Charts in the Company Reports

EPS

The price scale is on the left side of the chart and the fundamental scale is on the right.

Free samples

Consult the free examples on IRvalue.com (click on 'Charts').