Impact of Net Earnings per Share and Leverage on Stock Prices

In an era of rapid technological advancement and market volatility, understanding the financial determinants of stock performance is crucial for investors and stakeholders. We explore the influence of Net Earnings per Share (EPS) and financial leverage, as measured by the Debt-to-Equity (D/E) ratio, on the stock prices of NVIDIA and AMD, leading companies in the GPU market. Utilizing data spanning 2020 to 2024, EGARCH models are employed to examine stock price volatility and the effects of financial leverage. Multiple regression analysis is also conducted to establish quantitative links between stock prices, EPS, and D/E ratios. The predictive model, basing on the fitted data, is compared against actual stock prices, validating its accuracy. The findings reveal a robust positive association between EPS and stock prices, while the impact of the D/E ratio is more nuanced, pointing to divergent risk management approaches between NVIDIA and AMD. This research enhances the understanding of how financial indicators can shape stock performance, particularly within the technology sector. The results indicate that NVIDIA's stock price is more sensitive to EPS fluctuations, whereas AMD's stock performance is influenced by both EPS and moderate levels of financial leverage. These insights provide valuable guidance for investors seeking to optimize their portfolios in the tech industry.