Understanding EPS and How It Helps Investors Find Great Opportunities

Investors often look at a variety of metrics to figure out how well a company is doing. One such important metric is Earnings Per Share (EPS). If you've ever wanted to know the eps meaning, here's a straightforward explanation: EPS shows how much profit a business earns for each of its outstanding shares. Let's explore why it matters and how it can guide you toward the best undervalued stocks to buy now.

What Is EPS?

Earnings Per Share (EPS) is calculated by taking a company's net income (after taxes) and dividing it by the total number of outstanding shares of its common stock. Here's the general formula:

EPS = (Net Income - Preferred Dividends) / Average Outstanding Shares

- Net Income: The money a company makes after covering all its costs and taxes.

- Outstanding Shares: All the shares of a company's stock currently owned by its shareholders.

EPS essentially measures how profitable a company is on a per-share basis. A higher EPS indicates that a company is generating more profit per share, which many investors see as a good sign.

Why EPS Matters

1. Investor Confidence: A rising EPS over time often implies that a company is growing and can boost shareholder value.

2. Comparing Companies: EPS makes it easier to compare the profitability of different businesses, even if they vary in size.

3. Valuation: Many use EPS in popular valuation metrics such as the Price-to-Earnings (P/E) ratio. A low P/E ratio combined with strong or growing EPS can sometimes point to the best undervalued stocks to buy now.

How Investors Use EPS to Find the Best Undervalued Stocks

- Trend Analysis: Look for companies with a steady or growing EPS trend. This may suggest that the business is well-managed.

- Comparisons: Compare a company's EPS with its peers. If a competitor has a similar revenue but a higher EPS, it may mean that competitor is more efficient.

- Future Projections: Forward EPS estimates can help investors predict future performance, which can be highly valuable in picking undervalued stocks.

Financial Modeling Prep: Financial Estimates API

A powerful way to do forward-looking research is by checking financial estimates from analysts. The Financial Modeling Prep platform provides an API endpoint called Financial Estimates API, which returns data in JSON format. This data can help investors understand how analysts expect a company's EPS, revenue, and other metrics to perform in the future.

This is what data the endpoint provides:

{ "symbol": "AAPL", "date": "2028-09-28", "revenueAvg": 491628231859, "epsAvg": 9.76982, "epsHigh": 10.36257, "epsLow": 9.26175, ... }

Key fields:

- symbol: Ticker symbol of the company (e.g., AAPL).

- epsAvg, epsHigh, epsLow: Predicted earnings per share at different ranges.

- revenueLow, revenueHigh, revenueAvg: Estimated revenue within specific ranges.

- ebitdaLow, ebitdaHigh, ebitdaAvg: Estimated EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).

- netIncomeLow, netIncomeHigh, netIncomeAvg: Predicted profit ranges after taxes and expenses.

By analyzing these forecasts, investors can look for patterns in eps meaning and identify potential growth in profitability. When you combine this insight with other fundamental and technical analysis, you're better positioned to spot the best undervalued stocks to buy now.

This is how you can analyze companies after obtaining the data:

1. Year-over-Year Growth Analysis: By comparing the epsAvg value across multiple dates (e.g., 2027, 2028, 2029), you can track the predicted year-over-year growth. This can help you decide if the company's earnings trajectory aligns with your investment goals or if it signals the possibility of finding the best undervalued stocks to buy now.

2. Range Evaluation: The epsHigh and epsLow fields give you a confidence range from analysts. If the lower bound still suggests growth compared to prior years, it might indicate resilience in various market conditions.

3. Multi-Metric Correlation: Along with EPS, the JSON includes revenue and net income estimates (revenueAvg, netIncomeAvg etc.). You can compare forecasted EPS to forecasted net income or revenue to see if margins or profitability per share are improving. A strong correlation often reinforces investment confidence.

4. Dynamic Modeling: You can integrate these figures into spreadsheet models or financial modeling software. For example, take the revenueAvg and netIncomeAvg to calculate expected profit margins, and compare them to EPS forecasts to see if the company's profitability per share is consistent with overall growth.

By interpreting this data in the context of your broader analysis—such as reviewing a company's existing fundamentals, market trends, and competitive landscape—you gain a more robust outlook on potential stock performance. This helps you narrow down high-potential candidates and ultimately boosts your strategy to uncover the best undervalued stocks to buy now.

Whether you're a beginner exploring the market or a seasoned investor on the hunt for stocks to buy right now, understanding and tracking EPS can be a game-changer. Keep an eye on historical EPS trends, compare them against peers, and review forward-looking estimates to form a clear picture. This balanced approach can help you uncover promising opportunities and strengthen your overall investment strategy.