Corporate earnings are the money that companies make, and they are usually evaluated in terms of earnings per share (EPS). Earnings are also referred to as net income or profit. Investors are interested in EPS because it is the metric that tells them how much money a company has left after all expenses are paid, and it is a way to compare companies.
Companies can use the money they make to improve their products or develop new ones. Alternatively, they can pass the money on to shareholders in the form of a dividend or share buyback. Growing earnings are a good sign that a company is healthy and on the right track to providing a solid return for investors.
Publicly traded companies are required to report their earnings four times a year, and these reports are followed very closely on Wall Street. Investors can get a better idea of how well a company is doing by comparing its earnings to estimates made by analysts. If a company’s earnings beat expectations, it is said to have surprised the market, and its stock price typically rises. If it falls short of expectations, the stock price typically moves lower.
The data from corporate earnings is used by investors and analysts to make decisions about which stocks to invest in, and it is also a key factor in economic policymaking. For example, if rising EPS shares data suggests that companies are experiencing strong demand for their goods and services, it could lead to inflationary pressure. Conversely, falling EPS shares data would suggest that the companies are having trouble selling their goods and services to customers.