What is a reasonable EPS for a manufacturing firm?
Alphonso asks:
What is a reasonable Earnings per Share value for a manufacturing firm a couple of years since their IPO?
EPS defined as NetProfit/NumberOfShares
What is a reasonable Earnings per Share value for a manufacturing firm a couple of years since their IPO?
EPS defined as NetProfit/NumberOfShares
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If you mean reasonable for the investor, surely this depends on the price paid for each share.
maybe 4 or 5% of the share price or more.
I think it should have return on investment at least 2% more than what maximum govt. bonds are offering.
govt. bonds are safe, IPOs are not, so as per the basics of financial engineering 2% should be added to cover the risk otherwise why some one would invest?
I dont believe there is a suitable answer for what is classed as a “reasonable” EPS. If you generalise and assume that the P/E value of the firm is 10 what difference would it make if the firm has earnings of 100 and has a 100 shares giving an EPS of 1 and a price of 10 as opposed to 50 share and and having an EPS of 2 with a price equal to 20. Since the market capitalisation of the firm is unchanged there would be no benefit in having a target or “reasonable” EPS.