Earnings Per Share (EPS)

Earnings per share is a company’s net profit divided by the number of outstanding shares. A company that earned $500 million with 100 million shares outstanding has an EPS of $5.00 — that is the profit attributable to each share.

EPS is the earnings number behind the P/E ratio. When a company "beats earnings," it means the actual EPS came in higher than what analysts expected. These beats (and misses) often drive significant stock price moves.

Comparing EPS between companies is only meaningful if they have similar share counts. A company with $1 EPS is not necessarily less profitable than one with $10 EPS — it may just have more shares outstanding. P/E ratio normalizes for this and is usually more useful for comparisons.

Watch for the distinction between basic EPS and diluted EPS. Diluted EPS accounts for stock options and convertible bonds that could increase the share count. Diluted is the more conservative and more commonly cited number.