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the real importance earnings per share


investing in the stock market

Many people have said that earnings per share or the earning that a company makes per share are the best thing to look at too see how well it's doing. After all it is the companies net income right? Well sort of but it's not exactly 100% true. The EPS are calculated but taking the companies net income and dividing it by the number of shares that are available. This can be important but it doesn't take into consideration things like depreciation and what it takes for property and plant to maintain. That's why we have something better to look out for called free cash flow per share or cash per share.


The cash per share is what will actually be used in the purchasing of NEW ASSETS after the bond holders are paid or in some cases dividends. It can be used in one of two ways. The stockholders can receive cash or a dividend payed quarterly which is the usual corporate philosophy. The company can buy new assets, or have a reserve of a cash in investments or simply cash by itself both of which are considered retained earnings but if the company invests in itself it should have a high return on invested capital. Either of which really doesn't make any difference and usually in the long run it seems that dividends are not all they are meant to be becasue they are taxed heavily. Many people say that you should be receiving a dividend as a stockholder but they aren't really all that correct either because it would be smarter for the company to invest the money for you but that doesn't mean that the ability of a company to pay a dividend doesn't show STRENGTH. earnings per share and stock buybacks CLICK for more info

For a market strategy are dividends and earnings that important really?

It really in the short run doesn't matter if you give each stock holder 2 dollars of your EPS as a dividend or you use that 2 dollars earnings per share to try and INCREASE the book value per share by buying more assets like new stores. This will INCREASE the value of the stockholders in theory.

So would you like some cash now or your stock value and worth to increase? It doesn't really matter except for the fact that I tend to favor companies that invest the money FOR ME instead of giving me a dividend to worry about and thereby the purchase of more assets may help the company too. They can then buy more assets with it increasing my net worth and giving the potential of the new assets that they are buying to allow the company to make even more money. As of now, yahoofinance has cash per share listed in key statistics.

Remember earnings per share are not all they are cracked up too be, make sure you check cash per share which is listed on on the site above.. Lastly remember dividends are okay to a small degree but they aren't all they are cracked up too be either.