An Introduction To The Types Of Earnings Per Share

An Introduction To The Types Of Earnings Per Share

Each of the technical indicators that are used for analyzing a stock has a different story to tell. The limitation of using a technical indicator is that through a given indicator might capture some details about the asset there might be other details it totally ignores. So if you wish to create a decision making strategy that works in different market conditions have a combination of a handful of indicators.

Earnings per share are one of the most commonly used indicators in the stock market. This is calculated based on the net profits that would be shared with the stakeholders against the total outstanding shares that the company offers. Here are the most common types of EPS calculated-

  1. Pro Forma EPS

There could be some one-time expenses which are excluded in calculating the income in this case. It could even be a one-time profit made. When the company spends or earns money, say by buying or selling an asset then it might not be something that happens all the time. So EPS, in this case, would be calculated leaving out these figures in the income used for calculation.

  1. Cash EPS

As the name shows this one is calculated using the cash flow in place of the income. Operating cash flow is more of a steady parameter than the net income. So this EPS is quite dependable if you wish to understand the general EPS value of any given stock.

  1. Book value EPS

Considered to be one of the most important types of EPS by the market experts this one takes the company’s balance sheets into consideration. It is also called the carrying value EPS.

  1. GAAP EPS

Otherwise called the reported EPS, this one uses the generally accepted accounting principles. The types of incomes that are permitted for calculation would differ based on GAAP terms.

  1. Retained EPS

This gives an idea of the profits or the income that is retained by the company after sharing the allotted profits for the common stakeholders as dividends. The outstanding shares and the retained earnings are both used in this calculation.

Each type of EPS has a different significance. A combined study of the various types of EPS can help understand the actual profits made by the company and the actual benefits for the investor when the company makes a profit. You can easily do away with all the tedious computations if you choose to use a trading bot like Ethereum Code. But to really understand what such bots do in trading continue reading more about the bot that you pick.