Earnings per share is a good indicator of a company’s profitability. The way it is calculated is by working out how much of a given company’s profits are then apportioned to each share of common stock. EPS is also one of the main ways that a share’s price is calculated. One important thing to bear in mind with regard to EPS is that under some circumstances different companies can end up with the same EPS rating even if one is technically more efficient than the other. So a company that uses less capital to generate the same earnings as a less efficient company can be rated the same. Also EPS can be off due to reported earnings being manipulated.
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