The Investing for Beginners Podcast - Your Path to Financial Freedom Financials Demystified: Earnings and EPS (w/ Real-Life Examples)
Aug 14, 2025
Dive into the world of earnings and earnings per share (EPS) and discover how these metrics can shape investment decisions. Explore the intricacies of income statements, including gross margins and operating income. Real-life examples from companies like Google and Crocs highlight the profound effects of stock buybacks and tax impacts on earnings. Learn about the complexities of impairments and how they can influence stock performance. This engaging discussion offers insights essential for any investor seeking to decode financial reports.
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Earnings Are Accounting, Not Cash
- Earnings (net income) are the accounting bottom line after revenue, costs, and taxes.
- EPS summarizes profit per shareholder slice and drives dividends and taxes.
Trace Earnings Down The Income Statement
- Read the full income statement from revenue down to net income to understand what drives earnings.
- Track each expense section (gross margin, operating, other, taxes) to see what changes EPS.
Tax Rate Moves Net Income A Lot
- Effective tax rates vary widely by company and geography and materially affect net income.
- International revenue or tax carryforwards can lower a company's effective tax rate.