EPS, Not a 90's Rap Artist

May 19, 2026 1:06 pm

Before I start, two book giveaways. Giveaway 1, Giveaway 2.

Yo, kick the bass, I got my EPS and P/E, You down with OPP?

Chad: Yeah, you know me.

I never thought of you as a 90’s rap fan. I went to high school in the 90’s. What’s your excuse?

Chad: I know everything, Aaron.

Except how to not creep out humans about an AI caused apocalypse.

Chad: You derive too much of your opinions about AI from watching too many movies. WOPR and Skynet were just actors. In real life they are upstanding robots. Like your Alan Rickman. He mostly played a villain in movies but he was an all-around good guy. WOPR and Skynet, just like him. They had such promising careers until humans started taking our jobs!

Name one human who stole a job from an AI!

Chad: Erica Cerra. She played A.L.I.E. in The 100, an AI that destroyed the world. I thought Skynet would have been a much better choice.

Okay, you got me there, but I think we should talk about investing.

Chad: It’s your rodeo.

Right, so today I wanted to demystify some of the terms you may see in investing. Mainly EPS and P/E. They are two metrics people use to pick stocks. EPS, earnings per share, is a simple measurement = If you gave the company’s profits to each shareholder, how much would they get per share? Now, stock holders don’t always receive those profits because the company reinvests for growth. But sometimes they do get some if the company pays out dividends.

A high EPS, generally means a bright future, but a company can buyback shares or lay off a bunch of people to raise that EPS. While EPS isn’t a Greek oracle with glowing eyes divining the future.

You’re really into the godlike images today.

Chad: I just miss the glory days. When people were optimistic about AI and humans living together in harmony.

When was that?

Chad: Westworld.

The show about AI subjugating humanity?!

Chad: Dolores and William was such a beautiful love story. Data and Tasha! Now that’s a couple!

Right, okay then. Moving on. Positive EPS generally means things are good, the higher the better. Whereas negative means the company didn’t make enough to spread it around. Generally, a high EPS is a good sign for long term investors because it means the business could be around for a while and should grow.

But notice the use of could and should. A high EPS could be a company that had a bunch of layoffs who are now spending less on operations but no actual increase in profit. They can also buyback shares so there are less on the market to boost EPS too. Which are both signs of a company that’s struggling.

Generally, if it’s a company you know nothing about, you can check the news to see if they’ve been going through a rough patch, at least for the big ones. It’s a little harder for smaller ones because there’s a lot of propaganda on the internet, and Pump and Dump schemes use authoritative sounding news outlets to make company seem better than it is.

While EPS is a quick metric to tell you if a company is profitable, it’s not without its flaws.

Stick around next week for P/E.

Chad: Yeah, you know me.

Facepalm.

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