KUALA LUMPUR, Oct 20 (Bernama) -- Bursa Malaysia’s benchmark index edged higher at the close as bargain hunting emerged following Monday’s sharp sell-off, although it narrowly failed to reclaim the 1,600 level, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) gained 3.83 points, or 0.24 per cent, to 1,599.58 from Monday’s close of 1,595.75. The index opened 3.18 points lower at 1,592.57, marking its intraday low, and reached an intraday high of 1,602.83 in early trading. On the broader market, decliners outnumbered gainers 751 to 331, while 499 counters were unchanged, 1,259 untraded and 10 suspended. Turnover rose to 2.86 billion units worth RM2.42 billion against Monday’s 2.49 billion units worth RM2.38 billion.
Today, we gonna go back to basics and talk about one of the most fundamental analysis that we look at in investment of a stock...
EARNINGS PER SHARE (EPS)
This is in fact one of the most carefully followed metrics in investing.
Earnings per share generally means the portion of the company's profit that is allocated to each outstanding share of common stock.
It is what investors look at to gauge the profitability of a company.
EPS = net income - dividend to preferred shareholders
average outstanding shares
In practice, the weighted average number of shares is more accurate because the number of shares outstanding can change over time.
There is also the diluted EPS which takes into consideration of the shares of convertibles or warrants outstanding in the outstanding shares number.
Here is an important note to EPS that we feel readers/investors should look into when talking about EPS.
- Two companies could generate the same EPS number, but one could do so with less equity, thus the company would be more efficient at using its capital to generate income and, all other things being equal, would be a "better" company in theory.
- Investors need to be aware of earnings manipulation that will affect the quality of the earnings number. It is important not to rely on any one financial measure, but to use it in conjunction with statement analysis and other measures.
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