Does an increase in EPS reflect an increase in shareholder equity? and or share value?

Answer 1

Sometimes but not necessarily. For example a company might choose to write off a lot of worthless assets, a common occurance that will cause a drop in shareholder equity even though there has been an increase in EPS.

Share value is strickly governed by what people are willing to pay for the stock. Increasing EPS should have a bearing on that but it does not always. If it did the oil stocks would be selling for twice what they are selling for.

Answer 2

Neither, really. Shareholder value is strictly dependent on the stock price, which although is related to and often follows EPS, is a completely seperate thing. The actual stock price is determined by the market, and the market often uses EPS as a gauge for whether to buy/sell a stock. Share value is pretty much the same thing as shareholder equity, just another name for it. The only difference is that shareholder equity usually refers to the oustanding equity of a company, calculated by multiplying the number of shares outstanding by the share price. Share value is normally interpreted as the price of one share of stock.

Answer 3

There really isn't a direct correlation. A stock split will dilute EPS, but will have no affect on Shareholder's equity and practically on share value (aside from psychological).

Answer 4

All else being equal, share price should go up.

But all else is rarely equal. There are three main factors that affect share price: expected cash flows to the firm, risk of those cash flows and growth of those cash flows. Earnings are correlated with cash flows, so if EPS goes up, then the cash flow probably went up too. But if the expected growth rate drops or the risk of future earnings increases, you could have a drop in price despite the fact that earnings increased.