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.
