What Are EPS Stocks?

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EPS stocks, or earnings per share, are an accounting statistic that measures what is left after all revenue for a stock comes through the door and all expenses and taxes are paid. Avoid using EPS to accurately evaluate stock or business health with information from a financial adviser in this free video on investing and money management.

Part of the Video Series: Investments & Money Management Tips
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Video Transcript

Have you picked up the financial papers recently, and read about earnings per share, or EPS? Hi, this is Roger Groh at Groh Asset Management. What does it mean? Well, earnings per share simply is an accounting statistic, measuring what's left after all revenue comes in the door, all expenses are paid, and all taxes are paid. Whatever is left, would fall into earnings per share. Now that could be stated pretax or after tax, but usually in the public area, it's stated after tax. Is earnings per share a good statistic to spend a whole lot of time on? No. The reason is, it doesn't accurately reflect what's really going on in that business. An example, let's say that you write down the value of an asset, but you don't sell it, like the banks are doing today. For 2008. That means that you might report negative earnings per share. But in really life, the earnings per share haven't changed. The reason is you didn't sell anything and you didn't buy anything. All you did was change the valuation of one of the assets on your books. So, don't spend a whole lot of time on that. Go with a pro who knows what they're doing, dig deeper. I'm Roger Groh with Groh Asset Management. Thank you very much for spending time with me.


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