Definition:

Operating Income Per Share is a financial metric that measures the amount of operating income attributable to each outstanding share of a company's stock. It provides insight into a company's operational efficiency and profitability on a per-share basis.

Examples

If a company has an operating income of $500,000 and 100,000 shares outstanding, the Operating Income Per Share would be $5.00. Another example could be a company with an operating income of $1,200,000 and 300,000 shares outstanding, resulting in an Operating Income per Share of $4.00.

Formula:

Operating Income Per Share = Operating Income / Number of Outstanding Shares

How to use the metric:

Investors and analysts use Operating Income Per Share to assess a company's operational performance and compare it with peers. It helps in evaluating how effectively a company is generating income from its operations relative to its share count.

Limitations:

Operating Income Per Share does not account for non-operating income or expenses, taxes, or interest, which can affect the overall profitability. It also does not consider changes in share count due to stock buybacks or issuance, which can distort comparisons over time.

Applies to:

This metric is useful across various industries, particularly those with significant operational activities, such as manufacturing, retail, and services, where operational efficiency is crucial.

Doesn't apply to:

Industries with significant non-operating income or expenses, such as investment firms or real estate companies, may find this metric less relevant, as it does not capture the full scope of their income-generating activities.

Summary:

Operating Income Per Share is a valuable metric for assessing a company's operational efficiency on a per-share basis. While it provides insights into operational performance, it should be used in conjunction with other financial metrics to get a comprehensive view of a company's financial health.