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Earnings per share is calculated by dividing net income by shares outstanding. Book value is another way of saying shareholders' equity. Therefore, book value per share is calculated by dividing equity by shares outstanding. Consequently, the formula for the Graham number can also be written as follows:
= the value expected from the growth formulas over the next 7 to 10 years E P S {\displaystyle EPS} = the company’s last 12-month earnings per share 8.5 {\displaystyle 8.5} = P/E base for a no-growth company
As an example, if share A is trading at $24 and the earnings per share for the most recent 12-month period is $3, then share A has a P/E ratio of $24 / $3/year = 8 years. Put another way, the purchaser of the share is expecting 8 years to recoup the share price.
Earnings per share (EPS) measures the amount of total profit earned per outstanding share of common stock in a specific period, usually either a quarter or a year.
Earnings per share (EPS) is the monetary value of earnings per outstanding share of common stock for a company during a defined period of time. It is a key measure of corporate profitability, focusing on the interests of the company's owners ( shareholders ), [ 1 ] and is commonly used to price stocks.
Stock valuation is the method of calculating theoretical values of companies and their stocks.The main use of these methods is to predict future market prices, or more generally, potential market prices, and thus to profit from price movement – stocks that are judged undervalued (with respect to their theoretical value) are bought, while stocks that are judged overvalued are sold, in the ...
The second way, using per-share values, is to divide the company's current share price by the book value per share (i.e. its book value divided by the number of outstanding shares). It is also known as the market-to-book ratio and the price-to-equity ratio (which should not be confused with the price-to-earnings ratio ), and its inverse is ...
Conversely, $2,309.60 per Fair Isaac share may appear expensive in comparison, with its much smaller earnings — about $6 in the most recent quarter — relative to share price.