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Simply, EPS or earnings per share is about performing a calculation by the net profit of the company distributed among each of the shares that make up the total capital stock of the company. The result of this simple operation will be what in the end will determine what the earnings per share is. It will be extremely easy to calculate, and instead there are many benefits that it can generate in its application. Especially since it is a variable that you can configure to choose the composition of your investment portfolio. As a significant number of investors do to carry out their operations in the equity markets.
So that you understand it a little better and you can perform these calculations nothing better than using an example to understand it correctly. Well, if a company has a net profit of 500 euros, and its capital is made up of 1,000, the respective EPS or earnings per share would correspond to 0.50 euros per share. In each case in the values, BPA is different and its importance varies depending on whether this parameter is higher or lower. You can make a comparison between the profit that is present in the values of an index of the stock markets.
EPS: this is an indicator
In particular, earnings per share is an indicator for investing in the stock market. Because it will be very important in cases where Distribute dividends to its shareholders. To the point that it can give you a very rough idea of what their remuneration may be in the coming quarters. As is logical to think, the earnings per share is updated every year based on the results of the company. Either increasing it or on the contrary decreasing its valuation. It is also a clue to the actual status of the publicly traded company.
On the other hand, it cannot be forgotten that it is one of the calculations used by stock investors. At the same time, it has a remarkable link with another of the most used acronyms in this class of operations, the BY. For this purpose, EPS is considered one of the most important parameters to establish what the price per share of a company is. After all, it is what determines its valuation in the financial markets. Even though it will be very convenient for it to be accompanied by other variables for greater efficiency in the operation. Providing greater security to the decision that you are going to make from now on.
Importance of its amount
Earnings per share, on the other hand, is a very important aid to know if the price of a company is cheap or on the contrary it is expensive. As a result of this deciding factor, it can help you in which financial asset it may be more profitable to invest your savings. Because it will give you some strange signal about what to do at all times. Beyond the trend in which they are framed: bullish, bearish or lateral. It will be useful to complement your decision in the most objective way possible. Without risking money uselessly.
Advantages of this stock market parameter
There are many benefits, earnings per share can bring you from now on. Even though some of the most relevant are those that we expose you below so that you take them into account in your possible operations on the Stock Market.
- It is formed as one of the safer strategies to enter the stock markets. Because, among other reasons, they can give you the essential clues to opt for the best values of stocks today.
- It is a magnificent possibility to address the values that have a longest trip upwards. In particular, operations focused on the medium and long term. Where your growth potential can be much higher.
- It consists of a filter more than important to reduce your purchase options. Not in vain, it will be of great help to discard a series of values that will not be the most conducive to opening positions in them. From this dynamic, you will be protecting your money with greater security measures.
- It serves as the perfect complement to input signals that give some of these values. So that operations in the equity markets are not left to chance. And much less of listed companies that are not in the best conditions to be receptive to your next purchases on the Stock Market.
- Undoubtedly, it is one of the most objective variables you have. Because at the end of the day what it offers you is a business health information on that financial asset in which you want to invest the money. Something so simple, but at the same time necessary.
Linking with PER
The PER, for its part, is the link between price or value and earnings and is another of the most used strategies in the fundamental analysis of companies, especially those listed on equity markets. Its link to earnings per share is more than remarkable, as you can see below. Because, in effect, the PER also usually indicates that a company is cheap or expensive on a certain moment. On the one hand, a listed company with a high PER may indicate that there are high expectations that its share price will appreciate in the coming years.
If you need to know the PER of the companies in which you intend to invest your financial contributions, nothing is easier than to formalize some simple calculations. As the derivative of dividing the price of your price between earnings per share that occurs in those moments. Its result will be the real PER that this value of the bag has. Even though it can also be applied to other types of business accounting. On the other hand, the PER together with the earnings per share constitute two of the most important data to establish what should or should not be the securities contracted to make our operations profitable in the stock market.
Benefits in the Spanish stock market
Whatever the case, the securities integrated in the continuous market present an EPS that offers the odd surprise. Because it presents some positive developments with respect to the construction sector and some financial entities. To the point that it is giving some clue so that you can open positions, without exposing yourself to excessive risks. Because they are saying that your current purchase price is very beneficial to your personal interests. While in another series of proposals, his valuation today is not exactly low prices for his shares. This allows you to more effectively establish the investment strategies that you are going to put into practice from these precise moments.
On the other hand, don't you know that there are recurring EPS that are very beneficial for Spanish companies that are not included in the selective index of Spanish equities? Because in reality, beyond the Ibex 35 You can also find a very suggestive profit per share to give you more than one joy in these moments. Including listed companies of small or medium capitalization that have a good financial situation. I like it so that you can buy its shares and take advantage of the possible increases that can be developed in the next trading sessions.
Because from the analysis of earnings per share it will be much easier to detect the real business possibilities generated by national equities. And that cannot be discovered with other strategies driven by technical analysis. Even though some of these proposals are still affected by a downward trend that is about to stop in a short time. Of course they will be the most profitable elections.
