Series 66: Measures Of Profitability

Taken from our Series 66 Online Guide

Measures of Profitability

Earnings per share (EPS):

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Earnings per share measures how much of a company’s earnings belong to each share of stock. EPS indicates a company’s profitability. It is also used as the denominator in the price-earnings ratio.

Price to earnings (P/E) ratio:

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The P/E ratio measures the price investors are willing to pay for a stock per dollar of earnings. It is used by analysts to determine whether a stock is over- or undervalued. Stocks with higher P/E ratios indicate that investors expect h

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