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Dividend investors, growth investors, and other traders should conduct a fundamental analysis before making an investment. And one of the most important metrics they pay attention to is EPS. 

Understanding EPS 

So what is EPS stocks? Firstly, it is crucial to clarify that EPS is not a stock. EPS, or Earnings Per Share, is a measure of a company's profitability that shows how much profit each share of stock is worth. EPS is calculated by dividing a company's net income by the number of outstanding shares of common stock. A good EPS is relative to the company's industry and its competitors. But in general, a higher EPS is preferable to a lower one. 

Factors affecting EPS

EPS is affected by several factors, including:

1. Revenue. A company's revenue represents the total income generated from its sales activities. When a company's revenue increases, it typically leads to an improvement in its EPS, reflecting higher profitability.

2. Cost of Goods Sold (COGS). COGS refers to the expenses associated with the materials and labor used in producing a company's products or services. If a company experiences an increase in COGS, it can often lead to a decrease in EPS due to reduced profitability.

3. Operating Expenses. Operating expenses encompass the day-to-day costs incurred in running a company's operations, such as rent, utilities, and employee salaries. A rise in operating expenses typically puts downward pressure on EPS.

4. Interest Expense. Interest expense denotes the amount a company pays in interest on its outstanding debt. An uptick in interest expenses can lead to a decline in EPS as it increases the financial burden on the company.

5. Taxes. Taxes represent the payments made by a company to governmental authorities. If a company faces an increase in its tax obligations, it generally results in a decrease in EPS as it reduces net income available to shareholders.

6. Share Repurchases. Share repurchases occur when a company buys back its shares from the market. This action can potentially boost EPS because it reduces the total number of shares outstanding, effectively distributing earnings over a smaller share base and increasing the EPS figure.

Is EPS the sole metric to consider before making an investment decision

Obviously, no. EPS is just one of the crucial metrics that should be considered before investing in a company. Additional significant metrics are:

• Dividend Yield. This metric signifies the sum a company disburses in dividends per share of its stock.

• Book Value per Share. Book value per share is derived from the company's net assets divided by the total number of outstanding shares.

• Free Cash Flow per Share. This metric reveals the funds a company generates after covering operational costs, capital expenditures, and debt payments.

In conclusion, EPS is an important indicator for investors because it provides insight into a company's profitability on a per-share basis. It is commonly used for financial analysis and is often reported in a company's financial statements and earnings reports.