What are Company Earnings and its importance for an investor?

A company’s earnings, better known as earning per share (EPS), are its after-tax overall gain, or benefits, in a given quarter or financial year. Earnings are vital while evaluating a company’s productivity and they are a central point in deciding a company’s stock cost. An investor can look at the EPS as a measure to compare companies in the same sector. Moreover, EPS forms a part for many financial ratios which help investors calculate their risk-adjusted return. A higher EPS demonstrates that the stock has a higher worth when contrasted with others in its industry.

EPS = (Net Income − Preferred Dividends)/Number   of Shares Outstanding