EPS - How valuable really?

[Stocktrading101]

Curious as to who may tie this into their fundamental researching. I personally am a fan of diluted EPS vs just EPS. I think to make this number valuable you have to know the average for the industry and the company's competitors you are looking at. Straight forward EPS without any interpretation doesn't make much sense to me. I don't understand how people can buy based off of it, but that is just me. Opinions?

[anfern057]

i use it to look for growth over the previous quarters. thats about it

[victor]

I'm new in this forum, so hello all.

I like fundamentals more than tech. I don't consider myself as a value investor, just say that I'm closer to Peter Lynch than to Larry Williams.

Before pressing the BUY button I like to focus in, what I call, "earnings strenght". I don't trust any EPS number just because it's posted on money.msn yahoo.finance or whatsoever. This is, EPS is a must for fundamental investors, but in my opinion they only tell you half the story.

The other half is "Are earnings consistent? Will they improve in the future? What about book cooking?"

Most of us have had the chance to see past EPS falling through the cliff due to financial reestatements. Can you say World Com?

EPS (better diluted EPS) are great, but to make sure they are real and consistent I believe necessary to check in depth the cash flow statement.

For those interested in further research I attatch 2 papers.

http://www.aicpa.org/pubs/jofa/oct98/mills.htm

http://chicagogsb.edu/research/selectedpapers/sp84.pdf

Take care and good luck out there.

[Stocktrading101]

BuMp to that, great links Victor and welcome .

[bluechip_neo]

Hey guys! The truth of it, I didn't understand all that you said. I know how to compute EPS though, back in the college days, but when you label it as diluted, or pro forma, or just, what does it actually mean?! And how can I use it?!

Sorry for asking, I was just thinking of reading your messages in this type of forum to contribute to my learning. As they said, a child (like me in this field) can learn more from listening in a grown-up's conversation.

Thanks! :-)

[bluechip_neo]

Thanks a lot FirstConsul!! I didn't know that in China! :-) In my country, we are not also allowed to listen to adult chitchats!

I'll be reading over the link.

[Stocktrading101]

haha, good deal blue_chip . Where are from again man?