EPS (Earnings Per Share)
Learn how to calculate and interpret EPS (Earnings Per Share) with its formula, a worked example, industry context and common mistakes.
Shows the portion of company profit attributable to each weighted-average common share.
Formula
EPS = (Net Income - Preferred Dividends) / Weighted-Average Common Shares
Worked example$2 billion of attributable profit divided by 500 million shares gives EPS of $4.00.
Calculation steps
- Start with attributable net income of $2 billion.
- Use 500 million weighted-average shares.
- Divide $2 billion by 500 million to get $4.00 per share.
How to interpret it
Consistent EPS growth can signal improving profitability, but it should be checked against revenue and cash-flow growth.
Industry context
Share structures and normal margin levels differ widely, so EPS is most useful when compared with the same company's history and expectations.
Accounting and market variations
Definitions, reporting choices, periods, capital structures, and market conventions can change how this metric should be compared.
- Do not use ending shares instead of weighted-average shares.
- Distinguish basic EPS from diluted EPS.
- Check whether buybacks, dilution, or one-time items drove the change.