Profitability

How to Calculate Earnings per Share

Stock analysts and investors calculate earnings per share (EPS) as a means of conducting an “apples to apples” comparison among company performances. A company’s earnings per share is the portion of its profits allotted to each individual share of outstanding common stock. The earnings per share measure provides for an indication of company [...]

Net Present Value Calculator

A net present value (NPV) calculator can help you compare the current value of money with its future value. To determine net present value, all future payments are discounted in order to factor in the time value of money and the inherent risk that goes with an expectation of future streams of payment. [...]

Calculate and Interpret the Berry Ratio

The Berry ratio is a measure of a company’s gross profits to its operating expenses to provide an indication of company profits over a specific period of time. A measure of 1.0 or greater would show that the company is earning a profit over and above its variable expenses. A score of less [...]

Calculate and Interpret Return on Capital Employed (ROCE)

The return on capital employed (ROCE) is a ratio expressed as a percentage that is used to measure the return a company generates from the capital it employs. The return on capital employed is often used to compare the performance of two or more companies to assess how efficiently resources are being used. [...]

How to Calculate Gross Margin

Gross margin or “gross profit margin” is defined as the total revenue from sales for the company less its cost of goods sold, divided by total revenue from sales. Gross margin, then, represents the relationship between the company’s gross profit and its revenue from sales. The higher a company’s gross margin, the more [...]

The DuPont Analysis Formula (includes calculator)

DuPont Analysis, or DuPont Identity, offers a more detailed analysis when evaluating the return-on-equity (ROE) of a company. The measure was conceived by the DuPont Corporation in the 1920s to evaluate profitability, operating efficiency and leverage, all within the ROE analysis. Many financial analysts believe that the DuPont Analysis provides an excellent snapshot [...]

How to Calculate the Return on Assets Ratio

The Return on Assets (ROA) ratio provides an indication of how profitable a company is relative to its total assets. The ROA ratio demonstrates how much income management has been able to produce from a dollar’s worth of company assets. For this reason, investors often use this ratio to evaluate company management. The [...]

Return on Equity (ROE) in Stock Analysis
(includes calculator)

Return on Equity (ROE) is a measure of a corporation’s profitability that demonstrates the level of profit a company generates with the money invested by its shareholders. A high ROE means that surplus funds can be utilized to improve and expand the operations of the business without the shareholders having to invest more capital. [...]

The Importance of Net Profit Margin (includes calculator)

The net profit margin provides an indication of how well a company is controlling its costs. A high net profit margin demonstrates effectiveness at converting sales into actual profit. The measure is very useful when comparing several companies from within the same industry. Higher net margins can provide a company a significant competitive [...]