This is a bit of a follow up to an earlier question.
I understand how EPS is calculated. But I still don't udnerstand exactly what it tells me about a company.
Say Company A and B both have $10M in net earning.
Company A has 5M outstanding shares (EPS of $2)
Company B has 10M outstanding shares (EPS of $1)
What is the importance of the number of outstanding shares? Both companies had the same net earnings-so why does it matter how many shares of stock they have outstanding?
Finally, how does this effect the stocks price? Is it simply because when this number is released that people arrive at an opinion of the company, which leads to the prices going up or down? Or is the actual price of a company partially dependent on the EPS?
I'm trying to be as clear as I can with my question, if any clarity is needed, I will leave it as a follow up.
Thanks again.
2006-08-16
06:52:23
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