Income is money that an individual or business receives in exchange for providing a good or service or through investing capital. Income is consumed to fuel day-to-day expenditures. In businesses, income can refer to a company’s remaining revenues after all expenses and taxes have been paid. In this case, it is also known as “earnings”. Most forms of income are subject to taxation.
Net income (NI) is a company’s total earnings (or profit); net income is calculated by taking revenues and subtracting the costs of doing business such as depreciation, interest, taxes and other expenses. This number appears on a company’s income statement and is an important measure of how profitable the company is over a period of time.
For the trailing twelve months, Chevron Corporation (NYSE:CVX) earned an income of $2.91 Billion, on revenues of $118.75 Billion. The stock declared an annual dividend of $4.32 per share. Businesses use net income to calculate their earnings per share (EPS). Business analysts often refer to net income to as the bottom line, since it is listed at the bottom of the income statement. In the United Kingdom, NI is known as profit attributable to shareholders.
The 52-week range of the share price is from $97.53 – $119.00, while its earnings per share (EPS) was $1.53. The earnings per share (EPS) formula is stated as earnings available to common shareholders divided by number of common stock shares outstanding. EPS is an indicator of company profit because the more earnings a company can generate per share, the more valuable each share is to shareholders.
An important aspect of EPS that’s often ignored is the capital that is required to generate the earnings (net income) in the calculation. Two companies could generate the same EPS number, but one could do so with less equity (investment) – that company would be more efficient at using its capital to generate income and, all other things being equal would be a “better” company. Shareholders also need to be aware of earnings manipulation that will affect the quality of the earnings number. It is important not to rely on any one financial measure, but to use it in conjunction with statement analysis and other measures.
Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio.
Analysts also use the price-to-earnings (P/E) ratio for stock valuation, which is calculated as market price per share divided by EPS. Price to earnings ratio for CVX stock is recorded at $69.39. The P/E ratio calculates how expensive a stock price is relative to the earnings produced per share. For example, if the P/E ratio of a stock is 20 times earnings, an analyst compares that P/E ratio to other companies in the same industry and to the ratio for the broader market.
On Monday, Shares of Chevron Corporation (NYSE:CVX) gained 1.89% to $106.30. The company has total market capitalization of $205.19 Billion and a total of 1.89 billion outstanding shares.
The second stock to consider here with respect to its net income, EPS and P/E ratio is Microsoft Corporation (NASDAQ:MSFT). This company earned an income of $17.81 Billion, on revenues of $87.25 Billion, for the trailing twelve months. The stock declared an annual dividend of $1.56 per share.
MSFT stock opened its last trade at $69.33, and after floating in a range of $68.00 to $69.60, the stock closed its trade at $68.17. At the time of close, the stock holds total market capitalization of $520.50 Billion and a total of 7.72 billion outstanding shares. The 52-week range of the share price is from $50.39 – $72.89, while its earnings per share (EPS) was $2.27. Price to earnings ratio for the stock is recorded at $30.06.