Earnings Per Share
A company’s net profit divided by its number of outstanding shares.
Also called: eps · earnings per share
In plain language
EPS reduces total profit to a per-share figure, which makes it comparable across companies of different sizes and across time.
Diluted EPS accounts for options and convertible securities that could become shares. It is the more conservative and generally more useful number.
EPS is an accounting output and can be influenced by buybacks, one-time items and accounting choices, so the trend matters more than any single quarter.
The formula
Earnings Per Share
Net Income ÷ Shares Outstanding
Why it matters
EPS surprises against expectations are among the largest single-day movers in equities, and are a primary source of gap risk.
Common mistakes
- Reacting to headline EPS without comparing it to what was expected.
- Ignoring share count changes that flatter per-share figures.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
A company’s share price divided by its earnings per share.
A company’s scheduled quarterly disclosure of financial results.
A jump between one period’s close and the next period’s open with no trading in between.
A unit of ownership in a company.
The total market value of a company’s shares — share price times shares outstanding.