The key credentials
Publicly listed companies are obliged to produce annual statements for their shareholders. The reams of hard financial data you'll find in these reports can be incredibly intimidating at first glance, but there are a few calculable figures that can help give you a good idea of how well the company's doing:

Earnings per share (EPS) - EPS is calculated by dividing a company's earnings (roughly speaking, its profits after tax) by its total number of ordinary shares. It represents the money generated for shareholders by the company. A company with continually growing EPS looks good for the future. You'll find the data you need for the calculation in the report's profit and loss accounts.

Price/earnings ratio (P/E) - Current share price divided by EPS. P/E is best understood as a measure of the market's expectations of growth in the company - the higher the figure, the higher the expectations.

Dividends - Companies pay shareholders dividends from their earnings - the amount they pay per share is up to them. The dividend cover - the EPS divided by the dividend paid per share - tells you what proportion of its earnings a company is keeping for itself and how much is being used to line the pockets of shareholders.

Gearing ratio - A company's debt divided by its equity, normally expressed as a percentage. A large gearing ratio means a heavy reliance on debt - not necessarily problematic as long as the profits keep tumbling in. But it's a bad sign in a company that's historically volatile.

Market capitalisation - A way of measuring a company's value. It is the total value of the company's outstanding shares, which is obtained by multiplying its total shares by their current market value.

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