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Earnings affect Valuation of a Company
The more earnings a company generates relative to the number of shares it has outstanding, the more valuable each share is to investors.
Therefore, when evaluating a company, analysts calculate the earnings-per-share, or EPS.
EPS is a metric that divides the earnings available to common shareholders by the number of outstanding shares a company has.
For example, if a company has $100,000 in earnings and 50,000 outstanding shares, then its EPS is $2 per share.