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I am a newbie at investing. I just read that Google's IPO price was $85 per share. If I had invested $1000 to buy 11.76 shares at that time, then assuming that its stock price is $2,750 per share today, and if I decide to sell all my stocks, then I would now have $32,285. Is that right?

However, when I looked at the internet, I found another term, EPS, as well, so I got a bit confused at this point. If I also gain EPS, then I would have had a lot more money than just $32,285. So, does it mean that EPS has got nothing to do with investing? Do I even get EPS on just owning the shares, or not?

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A company hopefully if profitable. When they are one way to express that is using earnings per share. If they have profit of $1 Billion and they have $1 Billion shares then the earnings per share is $1. Of course companies that aren't profitable have losses per share. Many famous technology companies had losses in their early years as they built their customer base before they were able to build their advertising income.

Stock holders don't get the money mentioned in EPS. That is used by some investors to estimate what the share price should be, you will see that expressed as P/E ration or Price to earnings ratio.

The reason why you don't get the profits is because the company might want to use that money to expand their business by opening new stores, building a bigger factory, or by researching and developing a new rocket engine. Sometimes they use it to buy other businesses.

Sometimes they do give it to the stockholders in the form of a dividend. Many stockholders convert those dividends back into shares. Some companies have a long history of dividends, others have never given dividends.

There are many EPS numbers associated with a company. There are quarterly ones and annual ones. There are ones that are estimates of the current of future time periods.

I just read that Google's IPO price was $85 per share. If I had invested $1000 to buy almost like 11.74 shares at that time, then assuming that its stock price is $2,750 per share today, and if I decide to sell all my stocks, then I would have gained like $32,285. Is that right?

My math is slightly different. At the time very few brokers would have allowed you to invest in fractional shares, though almost all do now.

Therefore you would have had to decide 11 shares or 12. Lets go for it and assume 12 shares for $1020, plus a transaction fee. Now assuming that at the moment you sell your 12 shares the price is $2,750 you would receive $33,000 in cash into your brokerage account. That would make your profit $33,000 minus $1,020 or $31,980.

But wait there is a twist. In 2014 the company did a split. They would have turned your 12 shares into 12 Class A shares and 12 class C shares. They have a similar price, but they differ in voting power.

That means you would have has 12 class A shares to sell and 12 class C shares to sell. That would mean that if the prices are similar that would put $66,000 into your brokerage account with a profit of $64,980.

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  • Thanks .But why does company even have to split their stocks? I have heard that money raised by the company during initial IPO is the only money that company uses to grow its business(if needed they will issue another IPO). Once company has been established successfully, I don't think they use the money raised from stock market, benefit is solely to the investors itself. Is the company really generous to the people to let market forces of demand and supply to act on their stock so that people can be rich .Why should company even bother whether their stocks are going up or down ? Jan 15 at 16:29
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    Usually historical prices account for splits, so if you look at the stock history today and see $1000 - that would be post-split value even if the date is before the actual split. For example, GOOGL shows reaching $1000 in October 2017, not when the split occured in 2014: google.com/finance/quote/…
    – littleadv
    Jan 15 at 17:47
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    @CREATIVITYUnleashed a company can issue additional stock (usually with a vote of the existing shareholders), so then it matters to them. Also, the shareholders are the owners of the company, and it's often in their interest to have a high stock price, and the company wants to keep its owners happy. (And high-level employees are often paid in shares or options for shares, to make it also in their interest to have a raising stock price.) For more details, just look for other questions on this site, I'm sure that was asked before. Jan 15 at 23:07
  • @CREATIVITYUnleashed Companies don't have to do splits. Google split its stock into two stocks, in different classes (essentially it wasn't a split per se but rather a stock dividend of an additional stock of a different class). Some companies do splits to create more market liquidity (retail investors don't want to spend thousands of dollars per 1 unit of stock and rather transact in smaller amounts). This is somewhat mitigated by most brokerages allowing trading in partial stocks now.
    – littleadv
    Jan 16 at 4:32
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To state the basics, revenues/profits/earnings/EPS are accounting figures that tell you how the company is doing in its business. Stock price changes and dividends tell you how well the stockholders are doing in their investment.

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