Continued from my last article, we now look at the financial ratio for assessing the Market Value of a company.
Essentially, these Market Based financial ratios are able to relate the company performance to the market for its shares
EARNINGS PER SHARE (EPS):
|
FORMULA |
|
Earnings Available to Common Shareholders / Number of Shares Outstanding. |
|
MEASURE WHAT |
|
Indicates the amount of profit that has on average been earned by each share |
|
SCORE/VALUE |
|
A steadily increasing EPS is a hint that management is giving shareholders more for their money. |
|
SALIENT POINTS TO NOTE |
|
Earnings/net profit after deducting any profits owed to preference shareholders or minority interest. Re : the level of profit used is that profit that actually belongs to the ordinary shareholders |