📚 Stock Market Glossary
Clear, beginner-friendly explanations, real-world analogies, and visual formulas for key stock market terminology.
EPS (Earnings Per Share)
Valuation💡 Key Takeaway: The amount of net profit a company generates per single share of outstanding stock over a year.
Pizza Slice Analogy: EPS is the amount of topping on a single slice of an 8-slice pizza (total profit $8,000). If the pizza gets bigger or slice count shrinks, each slice gets more toppings (higher EPS)!
😎 10-Second Show-off Pro Tip for Friends!
😎 Show-off Tip: 'Don't just look at total revenue on earnings day. Check if EPS increased through share buybacks—that's the real driver for stock price growth!'
📖 Beginner-Friendly Explanation
STEP 1
Core Concept & Meaning
EPS (Earnings Per Share) divides a company's total net income by the number of outstanding shares.
STEP 2
Why It Matters & Mechanism
Simply put, it shows how much profit the company earns per single share of stock. Since stock prices ultimately track profit growth, rising EPS is the primary driver of stock appreciation.
STEP 3
Practical Investment Tips & Pitfalls
- Meaning of EPS Growth: Indicates improving business profits or a reduced share count through stock buybacks, boosting value per share.
- Link to PER: Dividing stock price by EPS yields PER (Price-to-Earnings Ratio), making EPS the foundational metric for stock valuation.
📊 EPS (Earnings Per Share) Calculation Formula
EPS = Net profit (KRW 10 billion) ÷ Total number of shares issued (10 million shares) = KRW 1,000
▶ If EPS doubles from 1,000 won to 2,000 won, there is a justification for the stock price to double as well.
⚖️ Key Comparison at a Glance
| Category | Company A (EPS 5,000 won) | Company B (EPS 1,000 won) |
|---|---|---|
| Net Profit | 50 billion won | 50 billion won |
| Number of shares issued | 10 million shares | 50 million shares |
| Profit per share Stamina | High (net exhaust) | Relative diluted |
| Driver of stock price rise | Strong stock price support line formed | Additional profit growth needed |
📌 Practical Market & Real-World Example
When Samsung Electronics boosts its net income so EPS rises from 3,000 KRW to 5,000 KRW, the stock becomes cheaper and more attractive on a PER basis even if the stock price remains unchanged.