This lecture has been prepared by the Hedgehog Staff. If you like what we do here, please click on our sponsor's banner. We described earnings per share in the last lecture. This gets a little more involved than that.
Companies typically report earnings per share in both basic and diluted forms.
Basic EPS is net income divided the shares outstanding whereas diluted earnings represent net income divided by shares outstanding plus all shares that have been issued in the form of options, warrants, etc. So when you see that, you will know what it means and be careful to compare apples to apples. Then they divide the stock price by this projected number. So let's do some examples here just to drive the point home with a picture instead of words. Oh, this is starting to make some sense.