EPS (Earnings per Share)

Earnings per share is one of the most closely watched numbers in a company's financial reports. It breaks total profit down to the level of a single share, which makes it easier to compare with the share price.

The basic formula is net income minus preferred dividends, divided by the weighted average number of common shares outstanding during the period.

Example: a company earns $500 million in a year, pays no preferred dividends and has an average of 250 million shares outstanding. Its EPS is $2.

Companies report basic EPS and diluted EPS, which also counts shares that could be created from stock options, convertibles and similar securities. Many companies also publish adjusted EPS, which excludes certain items such as restructuring costs. Adjusted figures are not standardized, so it is worth checking what was left out.

EPS is the E in the P/E ratio. It can rise because profit grows or because the share count shrinks, for example through buybacks. Analysts' EPS estimates are central to earnings season: whether a company beats or misses them often moves the stock.