Glossary of Financial Terms

Earnings per share is a measure of how profitable a company is. It is calculated by dividing the annual earnings a company makes (after tax, interest etc) by the number of shares it has issued.

Our earnings per share figures are based on the average earnings forecasts from a comprehensive selection of the top brokers.

This figure is based on the rise in earnings per share from one year to the next.

Brokers covering a particular stock predict the expected rise in earnings per share from the previous financial year. The average of these forecasts is then calculated to give an indication of how fast earnings are expected to grow. .

Sometimes you will see the letter R followed by a + or - sign.

This occurs when a figure for earnings per share growth cannot be calculated. Instead an indication is given of whether the company's fortunes are improving or deteriorating.

R+ reflects a situation where the company is expected to turn a loss per share in the last financial year into a profit. Or it is expected to reduce the amount of money it is losing per share.

R- reflects a situation where the company is expected to sink from a profit per share to a loss. Alternatively the company could already have made a loss per share last year and that loss is expected to rise.

The PER is calculated by dividing a company's share price by its earnings per share.

Our PER figures are based on earnings forecasts from a comprehensive selection of the top brokers.

For example:

ABC current share price is 200p

Brokers estimate that the group will produce earnings per share of 10p in the year to 31 12 2000

PE ratio = 20 (200p/10p)

If the share price changes or brokers change their forecasts the PER will change - so it is worth checking regularly.

As a general rule of thumb the lower the PER, the more attractive the share.

However, there are many other ways of valuing a share including the PEG ratio and there could be a good reason why a company's shares are not rated very highly at a particular time.

The PEG ratio is calculated by dividing the Price Earnings Ratio by the estimated growth in earnings per share

The growth in earnings per share is the percentage rise in earnings per share from the previous financial year.

The lower the PEG ratio the more attractive a share could be. A PEG of less than 1.15 is generally regarded as attractive.

This indicates if brokers have revised their earnings per share forecasts over the past few months.

If brokers have upgraded their earnings per share figures it might suggest that the company has been performing better than expected.

If brokers have downgraded their earnings per share figures it might suggest that the company has not been performing as well as expected.

However, there could be many reasons for a change in forecasts and it is always worth carrying out detailed research on a company before you decide to buy or sell shares.

The earnings per share changes are calculated by taking the current forecasts and comparing them to the forecasts made three months ago.

A dividend is a portion of a company's profit paid to shareholders to reward them for investing in the company.

The dividend per share is the income that a shareholder receives on each share invested in the company.

We provide the net dividend paid out by the company, after tax is deducted. The total (or gross) dividend is calculated by multiplying the net dividend by 1.25.

The dividend yield is calculated by dividing the net dividend per share by the share price.

For example:

XYZ announces an annual net dividend of 10p per share

XYZ current share price is 200p

Dividend yield = 5% (10/200 multiplied by 100 to work out a percentage)

The higher the dividend yield the higher return an investor could expect - although you should also consider whether the company's share price is likely to go up or down and its profit prospects.

The DigitalLook.com web site allows you to carry out extensive research on UK companies. We do not provide investment advice - merely a tool to help you find out more about the shares you are interested in.

Do not take just one investment measure on face value. Please look at all the investment measures mentioned above and read the latest news and analysis on the stock you are interested in before making any decision to buy, sell or hold a share.