How to analyse a stock?(part1)

there are various methods to determine the true value of stock.In this i would be talking abiut EPS or Earning per share the reason many investors use this is because it provides a insight into a company's earning which often affects a stock it is even considered as one of the most important variable in determining share price it is one of the major component to calculate P/E ratio or price to earning ratio.In general EPS means what does every share earn in a year.

Formula and Calculation for EPS

The earnings per share value are calculated as the net income (also known as profits or earnings) divided by the available shares. A more refined calculation adjusts the numerator and denominator for shares that could be created through options, convertible debt, or warrants. The numerator of the equation is also more relevant if it is adjusted for continuing operations.

$\text{Earnings per Share}=\frac{\text{Net Income }-\text{ Preferred Dividends}}{\text{End-of-Period Common Shares Outstanding}}$

To calculate a company's EPS, the balance sheet and income statement are used to find the period-end number of common shares, dividends paid on preferred stock (if any), and the net income or earnings. It is more accurate to use a weighted average number of common shares over the reporting term because the number of shares can change over time.