Definition
EPS is a fundamental profitability metric that shows how much profit a company generates per share. Basic EPS uses the weighted average of common shares outstanding, while diluted EPS accounts for convertible securities, options, and warrants.
Consistent EPS growth over multiple quarters signals strong business performance and often drives stock price appreciation.
functions Formula
EPS = (Net Income − Preferred Dividends) / Weighted Avg Shares Outstanding
lightbulb Example
A company earns $10M in net income with 5M shares outstanding. Basic EPS = $10M / 5M = $2.00. If there are 500K dilutive options, diluted EPS = $10M / 5.5M = $1.82.
verified_user Key Points
- Basic vs diluted EPS—always check which is reported
- EPS growth rate matters more than absolute value
- One-time charges can distort EPS temporarily
- Compare EPS trends over 4-8 quarters minimum