Largely this involves planning to hold a diverse portfolio that encompasses several different sectors and taking the time to research and evaluate the stocks that are up for consideration. However, with many thousands of stocks to consider it would be impossible to check out every single company report or income statement for any significant number.

Ultimately this logistical consideration means you need a plan B, a way to quickly identify which stocks have real potential for you and are worthy of further investigation.

Ways to narrow the field

• Decide what you want to achieve from investing. Your portfolio should be focused on stocks that reflect your major goals. Whether that’s to make a decent income, invest in stocks that will likely appreciate in the future, or trade lower returns for more stability.
• Keep an ear to the ground. This involves talking to the right people, reading as much as you can about current affairs that could affect the market, and being aware of what is going on in the business world in general.
• Compare the earnings per share results of stock between several contenders for your cash. Then use the information received to evaluate their worth and decide if they would be a good buy.

This is where we start the practical part of this article – with a brief guide covering how looking at earnings per share stats can help inform your decision on buying stock.

What is a stock ‘earnings per share’ [EPS] formula?

This is a common method of awarding an instant valuation to stock, and the number awarded is reached by a simple calculation.

A company’s net income is calculated and then divided by the number of shares that are outstanding. When looking at EPS results for a couple of years growth of any size is always good, while anything recording a 25% plus EPS on the previous year is considered very good and presumed to involve a commodity with unlimited demand.

When you are working through your shortlist and find a company with a positive-looking earnings per share figure it’s an exciting moment, but to evaluate the stock’s true worth to you involves being a little more cool-headed.

Next, you need to:

• Look at how the current figure compares to those of previous quarters or years. Is it steady, or does the figure show instability or mixed fortunes? You can always check out the reasons for some unusual result if you are keen on the stock but don’t get carried away if the business profits seem unusually volatile.
• Take the EPS rating scheme into account. IBD EPS rating analyzes a company’s performance, growth, and stability over three years before assigning a performance score ranging from 1 to 99. (99 is fantastic.). Where this falls a little is when a company is fairly new – it will lack the high numbers simply because it didn’t exist when parameters were put in place. Working on numbers alone, a one or two-year trading history can never compete against a well-established company because they start from different points.
• Don’t overlook IBDs other rating systems, which include:

–          RS (Relative Strength) rating which reflects how the stock’s price did in the last year compared to others. Ranked from 1 – 99, with 99 being the absolute best, a score above 80 is great.

Be aware there are different types of earnings per share results.

Of course, the basic point of the EPS figure is to indicate how much profit has been generated by a company after monies for taxes have been set aside, and ultimately how much will be paid in profit dividends per share, but there is more than one type.

Standard EPS

This is the term we have focused on today, and as we mentioned earlier it is a simple calculation; you just need to know the net income and divide that by the number of shares issued. So if Company A reports a 1 million USD profit and has 1 million shares issued each would attract a $1 profit.

Diluted EPS

This is the dividend paid out if all possible securities which could be converted, such as warrants and stock options were deducted from the net profit before dividing the figure between the number of issued shares.

Adjusted EPS

This is the one to be wary of as it is not generally a real representation of the stock’s worth because it is reached by removing lots of losses due to them not being related to key activities. It’s a little like cheating but it is allowed.

If the world of earnings per share sounds appealing to you Click here to check it out. There’s always something new to learn! In the meantime approach this issue with caution. It’s pretty easy to big things up without revealing the possible pitfalls ahead, so this is a field investors need to enter with caution and an awareness of the nature of the game.

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Facebook Shares

Facebook shares are attempting to break out after closing above trend line resistance. The trend line is very helpful in determining support which there are demand and supply where there is resistance. A close above a downward sloping trend line is generally a sign that markets are poised to move higher. Short-term support on Facebook shares is seen near the 10-day moving average at 167. Additional support is seen near the 50-day moving average at 55. Prices will need to clear the February highs at 172.50 to confirm the breakout.

Medium term momentum is positive as the MACD (moving average convergence divergence) index recently generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the (moving average convergence divergence)MACD signal line (the nine-day moving average of the MACD line. Short-term momentum has turned negative as the fast stochastic (red arrow) generated a crossover signal line in overbought the territory. The current reading on the fast stochastic is 76, which is below the overbought trigger level of 80, which means that there continues to be some short-term negative momentum.

Apple Shares

Apple rebounded and remains in a tight range which has encapsulated the share price for more than 1-months. Support is seen near the 50-day moving average at 163.85. Prices opened on Monday above resistance near the 20-day moving average at 172.86. This will now be seen as short-term support. A close above the March highs at 177.75, will be seen as a breakout on the stock prices.

Prices stopped at a 38.2% Fibonacci retracement level. The Fibonacci retracements describe target levels after a large move up or down. The next level of target resistance on a close above resistance is seen near the $200 per share mark.

The 20-day moving average recently crossed above the 50-day moving average which shows that a medium-term uptrend is in place. Volatility is very low. The Bollinger band width is showing that short term volatility is at its lows level since June of 2018. The Bollinger band width subtracts the Bollinger ban high from the Bollinger band low. Low volatility levels can last for a while, but it is unwise to short a quiet market. The relative strength index (RSI) which is a momentum oscillator has rebounded after drifting lower. This reflects accelerating positive momentum. The reading of 60 on the RSI shows that prices are consolidating and remain in the middle of the neutral range. Reading on the RSI above 70 are considered overbought while a reading below 30 is considers oversold.

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