Earnings Per Share

Once I know a business is profitable, I look at the:

1.)Earnings per share
2.)Revenue per share
3.)Price/earnings ratio
4.)Return on equity
5.)Book value/share
to inform my investment decision.

Earnings per share is the amount of money a business earned over a period of time, divided by the number of shares outstanding.

English: The bigger the better. The more a business is earning, the more successful it is. Earnings per share should also be increasing over time.

For a more detailed definition, go to: http://www.nasdaq.com/reference/dozen/earnings-per-share.stm

To see if the earnings per share is increasing over time, go to the businesses web page. Every publicly traded company should have a link called Investor Information or Investor Relations, or something like it. Click on it. If you can't find it on the home page, do a Google search for "company name investor relations".

Select financial information, statements, income statements, or annual reports (usually a PDF document, and may exist for previous quarter, years, etc.). Find the income statement. Locate the last line item (or close to the last), and it will be earnings per share.

It's important to note that, even though numbers seem like the are pretty concrete measures, they aren't. Businesses have the ability to make assumptions, and make their own formulas that will result in numbers that look great. They know what numbers investors are looking at, and they want them to look good. That's why the more information you can look at, and them more questions you can ask about a company, the better the chance that you'll choose a company that'll make you some cash.

I digress.

Tomorrow we'll find the most recent earnings per share for each of the five big banks we're comparing.