Investing for Beginners , investing

Earnings per share (EPS) shows how much of net earnings are allocated to one common share. EPS might give some guidance about the value of the share for shareholder. Share price compared to EPS is equal to P/E ratio, which is very popular in relative valuation. 

EPS might be important characteristic for the share if there are more than one share classes with different face values. This indicator might be even the most important for a share. When investor knows how much of company’s net profit is attributed to the single share that he owns, he may have some presumptions about how much his shares might be worth. As earnings usually refers to net income there are more types of profit and all those can be important for stock valuation.