What is EPS?
The company’s profit per share is called EPS, which is calculated by dividing the net profit by the number of shares of the company. To check the EPS of different companies, everyone can check this parameter periodically. But because companies can have different EPSs depending on how big or small they are, this criterion alone is not enough; This means that we can not conclude that the higher the EPS, the better the company, but this comparison should be based on the number of shares of the company and the price they have on the taboo.
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Determining profitability with P / E ratio
The P / E ratio is typically used to value stocks.
The P / E value of the share is calculated by dividing the share price by EPS (earnings per share). This ratio simply states how much you share in the dividends for each currency you invest in a company’s stock.
For example, the price of a company share is 5000 Tomans and the profit per share is 1000 Tomans. By dividing the price by the net earnings per share (EPS), the P / E ratio is calculated. In the example, this ratio is calculated as 5. In other words, this ratio can be defined in such a way that in fact, in order for you to be able to return your initial amount of capital, it takes 5 years for your rate of return to be 5 years.
Access to P / E ratio
In the table section, the value of EPS (in Rials) and P / E (ratio that is without a unit) is specified and can be displayed.
For example, the P / E of the stock as shown in the figure below is 18.16 and the P / E of the other stock is 236.6, which indicates the difference in this ratio between different companies.
Therefore, to compare this ratio, it is important to note that stocks belong to one industry because stocks belong to a certain industry have a specific P / E, ie we can not use different industries to examine the P / E ratio of stocks. . So the important point is that the P / E ratio cannot be used to compare two shares from different industries.
Another important point is to predict stock EPS in the future and to predict the variables that affect companies’ EPS. It is the responsibility of fundamental analysts to predict EPS stocks in the next year or two based on forecasts and future developments in the industry, and to price the stock in the near future with the P / E that may enter the market. Do.
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