Small and medium investors will have encountered the acronym BPA on more than one occasion, but they may not know what its real meaning is and the impact it can have on their operations in the financial markets. Well, BPA is nothing less than the acronym for earnings per share. It is one of the variables most effective for investing in the securities that make up the stock indices. Beyond the technical approaches that you use to make profitable the savings in the purchase and sale of shares on the stock market. It is a very relevant piece of information so that you can open positions from now on.
EPS or earnings per share basically consists of making a calculation on the part of the net profit of the company distributed among each of the shares that make up the total capital stock of the company. The result of this simple operation will be what the end will determine what is the earnings per share. It will be very easy to calculate, and instead there are many benefits that it can generate in its application. Especially because it is a variable that you can set to select the composition of your investment portfolio. As a good number of investors do to carry out their operations in the equity markets.
So that you understand it a little better and you can carry out these calculations nothing better than through an example to understand it correctly. Well, if a company has a net profit of 500 euros, and its capital is made up of 1.000, the corresponding EPS or earnings per share would correspond to 0,50 euros per share. In each case in the values, BPA is different and its relevance varies depending on whether this parameter is higher or smaller. You can make a comparison between the profit that is present in the values of an index of the equity markets.
EPS: this is an indicator
Above all, earnings per share is an indicator for investing in the stock market. Because it will be very important in cases where distribute dividends to its shareholders. To the point that it can give you a very rough idea about what their remuneration may be in the coming quarters. As is logical to think, the earnings per share is updated every year depending on the results of the company. Either increasing it or on the contrary decreasing its valuation. It is also a clue to the actual status of the listed company.
On the other hand, you cannot forget that it is one of the calculations used by investors in the stock market. In addition, it has a remarkable relationship with another of the most used acronyms in this class of operations, the BY. In this sense, EPS is considered one of the most important parameters to determine what the price per share of a company is. It is the after all determines its valuation in the financial markets. Although it will be very convenient that it is accompanied by other variables for greater efficiency in the operation. Providing greater security to the decision you are going to make from now on.
Relevance of its amount
In any case, it is not a definitive data to carry out operations in the equity markets. If not, on the contrary, it may well be the case that two or more companies present the same earnings per share, but in some cases requiring a greater effort in the results to reach this destination. This is one of the reasons why BPA should be supplemented by other analysis alternatives. Not surprisingly, it can be very complex that you are in a position to detect its true meaning. Or simply let yourself be carried away by the recommendations of some financial intermediaries.
Earnings per share, on the other hand, is a very important aid to know if the price of a company is cheap or on the contrary it is expensive. As a consequence of this decisive factor, it can help you in which financial asset it can be more profitable to invest your savings. Because it will give you the odd signal about what you should do at all times. Beyond the trend in which they are framed: bullish, bearish or lateral. It will serve to complement your decision in the most objective way possible. Without risking money in a useless way.
Advantages of this stock market parameter
There are many benefits, the earnings per share can bring you from now on. Although some of the most relevant are those that we expose below so that you take them into account in your possible operations in the stock market.
- It is conformed as one of the safer strategies to enter the equity markets. Because, among other reasons, they can give you the necessary clues to opt for the best stock values at the moment.
- It is an excellent opportunity to address the values that have a longest run upward. In particular, operations aimed at the medium and long term. Where its growth potential can be much higher.
- In this filter more than important to reduce your purchase options. Not in vain, it will be a great help to discard a series of values that will not be the most conducive to opening positions in them. In this way, you will be protecting your money with greater security measures.
- It serves as a perfect complement to input signals that give some of these values. So that operations in the equity markets do not leave it to improvisation. And much less from listed companies that are not in the best conditions to be receptive to your next purchases on the stock market.
- Without a doubt, it is one of the most objective variables you have. Because at the end of the day what it is providing you is a business health information about that financial asset where you want to invest the money. Something so simple, but at the same time necessary.
Relationship with PER
The PER, on the other hand, is the relationship between price or value and profits and is another of the strategies widely used in the fundamental analysis of companies, especially those listed on equity markets. Its relationship with earnings per shares is more than remarkable, as you can see below. Because in effect, the PER also usually indicates that a company is cheap or expensive at a certain time. On the one hand, a listed company with a high PER may indicate that there are many expectations for its share price to appreciate in the coming years.
If you want to know what is the PER of the companies where you want to invest your financial contributions, nothing is easier than formalizing some simple calculations. As the derivative of dividing the price of your quotation between earnings per share that presents in those moments. Its result will be the real PER that you have that value of the bag. Although it can also be applied to other types of business accounting. On the other hand, the PER, together with the earnings per share, constitute two of the most important pieces of information to determine which securities should or should not be contracted to make our operations on the stock market profitable.
Benefits on the Spanish stock market
In any case, the securities integrated in the continuous market present an EPS that offers the odd surprise. Because it presents some positive news regarding the construction sector and some financial entities. To the point that it is giving some clue so that you can open positions, without exposing yourself to excessive risks. Because they are saying that their current purchase price is very beneficial to your personal interests. While in another series of proposals, his valuation at this time is not exactly low prices for his shares. This makes it possible for you to more effectively define the investment strategies that you are going to implement from these precise moments.
On the other hand, don't you know that there are some very beneficial recurring EPS for Spanish companies that are not included in the selective index of Spanish equities? Because indeed, beyond the Ibex 35 You can also find a very suggestive profit per share to give you more than one joy from these moments. Even small or mid-cap listed companies that are in good financial standing. Like so that you can buy their shares and take advantage of the possible increases that could develop in the next trading sessions.
Because from the analysis of earnings per share it will be much easier to detect the real business opportunities generated by national equities. And that cannot be discovered by other strategies driven by technical analysis. Although some of these proposals are still affected by a downward trend that is about to stop in no time. Of course they will be the most profitable elections.