It lets you know whether or not the company is profitable
EPS is a measure of a company's profitability, indicating the portion of a company's profit allocated to each outstanding share of common stock. A positive EPS indicates profitability, while a negative EPS could suggest the company is losing money.
The other options listed do not accurately describe the use of EPS:
- EPS does not directly tell you whether a company pays a dividend. While a profitable company (which might have a high EPS) is more likely to pay dividends, it is ultimately up to the company's board of directors to decide whether to distribute profits as dividends or to reinvest them back into the company.
- EPS does not reveal how much the stock price has grown in the past year. Stock price growth is usually tracked via price appreciation over a specified period and is influenced by various factors, including but not limited to EPS.
- EPS does not tell you how large the company is. Company size is often evaluated by market capitalization (stock price times the number of outstanding shares), revenue, or number of employees.