EPS (Earnings Per Share)
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.
Common mistakes
- 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.