StocksResult
📝 Understanding EPS (Earnings Per Share)
💰 Understanding EPS (Earnings Per Share)
Imagine you and your 4 friends 🧑🤝🧑 open a small cake shop 🍰.
After 1 month, your shop earns ₹10,000 profit.
Now the big question:
👉 How much profit does each friend get? 🤔
You divide ₹10,000 by 5 friends = ₹2,000 per friend.
✅ This “profit per friend” is like EPS – Earnings Per Share! 🎯
🎯 What is EPS?
EPS means:
💡 How much profit does the company make for every single share?
✔️ Total profit made by the company = ₹10,000
✔️ Total number of shares = 5 shares
👉 EPS = ₹10,000 ÷ 5 = ₹2,000 per share
So, if you own 1 share, this ₹2,000 is "your share" of the profit!
📚 Why EPS is Important for Investors?
✔️ Higher EPS = More profit for each share = Good sign! 🤑
✔️ Lower EPS = Less profit per share = Be careful! 😰
Think of this like pizza 🍕:
👉 Large pizza cut into 4 slices = Big piece per friend 😍
👉 Large pizza cut into 20 slices = Tiny piece per friend 😩
Same way:
💵 High EPS = Big share of profit for each stockholder
💵 Low EPS = Small share of profit for each stockholder
🔍 EPS Formula (In Simple Words):
EPS = Total Profit (Net Profit) ÷ Total Shares
Example:
👔 A company earns ₹1,00,000 this year.
🧾 It has 10,000 shares in total.
👉 EPS = ₹1,00,000 ÷ 10,000 = ₹10 per share
🎨 Funny Example:
Your friend Chintu opens a samosa shop 🥟.
✔️ Earned ₹5,000 profit in 1 month
✔️ Issued 100 shares to friends
EPS = ₹5,000 ÷ 100 = ₹50 per share
If you have 1 share = ₹50 profit belongs to you! 🎉
But if Chintu issues more shares (say 200), then:
EPS = ₹5,000 ÷ 200 = ₹25 per share
💥 Oops! EPS becomes half — Your share of the profit shrinks! 😬
🚨 Why Should You Care About EPS?
✔️ EPS tells if a company is really earning money for its shareholders.
✔️ Good EPS = Strong company = May give more dividends 💸
✔️ Growing EPS every year = Good sign 📈
⚠️ EPS Traps to Avoid:
❌ Company shows fake high profit but borrows too much debt! 💳
❌ EPS suddenly falls = Company may be in trouble! 🚨
❌ Too many new shares issued = EPS gets diluted (reduced) like watery tea ☕😂
💥 Bonus Gyaan:
There are two types of EPS:
1️⃣ Basic EPS = Simple calculation (like above)
2️⃣ Diluted EPS = After considering extra shares (like convertible bonds, options, etc.)
👉 Smart investors also check Diluted EPS for safety! 🧐
🎯 Summary (In One Line):
💡 EPS = Profit Per Shareholder!
✔️ High EPS = Good earnings, happy investors 😄
✔️ Low EPS = Poor earnings, risk of loss 😟
✔️ EPS growing every year = Company on the right path 🚀
🎈 Funny Tip:
If company EPS keeps falling…
Run faster than you run from your friend when he forgets to pay for tea! 🏃☕😂
Understand EPS = Understand how much the company is earning for YOU! 🧠💹