Ask a Fool: What Is Earnings Per Share?

Worldwide Invest Better Day 9/25/2012

Foolish analyst Andrew Tonner answers the question: What is earnings per share?

Earnings per share is net income divided by the total number of shares outstanding. Plainly put, it's the amount of money an investor earns for each share of a company's stock he or she owns.

Andrew points out that this figure can change drastically based on how much net income changes from period to period, but it can also change by the number of shares a company has outstanding. Shares outstanding can grow if a company issues more shares or decrease if they buy some back.

For context, Google's earnings per share in the most recent period were $34.21, more than twice what it was just a few years ago.

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Andrew Tonner has no positions in the stocks mentioned above. The Motley Fool owns shares of Google. Motley Fool newsletter services recommend Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On September 23, 2012, at 12:40 PM, notthisagain wrote:


    when you say "it's the amount of money an investor earns for each share of a company's stock he or she owns." that is different than my concept of earning something. For me if I earn it I physically have it, not just a posted number. The only earnings I receive are in dividends or in the stock price rising. I wish that I would get a portion of the company earnings. Because I do not get any of the earnings I do not think that "share buyback" has any real effect for me the small investor. I have not noticed any price change to reflect the money spent in buybacks. Sometimes the stock price will reflect the earnings but it seems to be more a reflection of the opinion an analyst. A "buy or sell" rating change and the stock price moves. I think that opinions are driving market price more than anything else.

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