1. What is EPS and P/E Ratio?

EPS (Earnings Per Share) is a company's profit divided by its number of outstanding shares. P/E Ratio (Price-to-Earnings Ratio) is a company's share price divided by its EPS. These metrics are fundamental to stock valuation and investment analysis.

2. How Does the Calculator Work?

The calculator uses two financial formulas:

Where:

• \( Earnings \) — Company's total earnings in dollars
• \( Shares \) — Number of outstanding shares
• \( Price \) — Current stock price per share
• \( EPS \) — Earnings per share
• \( P/E \) — Price-to-earnings ratio

Explanation: EPS measures a company's profitability on a per-share basis, while P/E ratio shows how much investors are willing to pay for each dollar of earnings.

3. Importance of EPS and P/E Ratio

Details: EPS is a key indicator of a company's profitability and is used to compare companies within the same industry. P/E ratio helps investors determine if a stock is overvalued or undervalued relative to its earnings.

4. Using the Calculator

Tips: Enter total earnings in dollars, number of outstanding shares, and current stock price. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good EPS value?
A: Higher EPS is generally better, but it varies by industry. Compare with competitors and historical performance.

Q2: What is considered a reasonable P/E ratio?
A: P/E ratios vary by industry. Generally, ratios between 15-25 are considered reasonable, but growth companies often have higher ratios.

Q3: Should I use trailing or forward EPS?
A: Trailing EPS uses past earnings, while forward EPS uses projected earnings. Both have value depending on your analysis approach.

Q4: Can P/E ratio be negative?
A: Yes, if a company has negative earnings (losses), the P/E ratio will be negative, indicating the company is not profitable.

Q5: How often should I calculate these metrics?
A: These should be recalculated with each earnings report or significant stock price movement for accurate analysis.