Which metric would you use to assess profitability per share?

• A. EPS
• B. P/E Ratio
• C. Dividend Yield
• D. Beta

Answer: (A)

Profitability per share is captured by earnings per share. EPS tells you exactly how much profit is attributed to each share of common stock, giving a per-share view of a company’s profitability. It’s calculated by taking net income (after preferred dividends, if any) and dividing by the weighted average number of common shares outstanding, with a basic version and a diluted version that accounts for potential share dilution from options or convertible securities. A higher EPS indicates more profit earned for each share, making it a direct measure of profitability on a per-share basis and a useful basis for comparing companies or tracking performance over time.

The other metrics serve different purposes. The price/earnings ratio relates price to earnings to gauge valuation, not the actual profit per share. Dividend yield shows cash returns from dividends relative to price, not overall earnings per share. Beta measures a stock’s sensitivity to market movements, i.e., risk, not profitability.