Earnings per share definition

Earnings per share, or EPS, is an important metric in a company’s earnings figures. It is derived from the total amount of profit generated in a period, divided by the number of shares in the company listed on the stock market.

EPS is used to determine the value attached to each outstanding share of a company. In a market where the amount of profit made by companies and the amount of shares on exchanges can vary, EPS gives a per-capita way of evaluating companies.

To calculate a company’s EPS, first derive their net profit by taking net income and subtracting any dividend payments. Then divide that figure by the amount of outstanding shares: usually taken as a weighted average over the period.

EPS is a very important factor when examining a business’s fundamentals

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To see when companies are releasing earnings, take a look at the economic calendar.

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