Earnings per share

Earnings per share divides a company's net income by its number of shares outstanding. It shows how much profit is attributable to a single share of stock, turning a company-wide profit figure into a per-share number that can be compared directly to the share price.

The formula is:

Companies usually report two versions. Basic EPS uses the weighted average number of shares outstanding over the period, and subtracts any preferred dividends from net income first. Diluted EPS uses a higher share count that adds shares which could be created later through stock options or convertible securities, counting only those that would lower EPS, and is therefore always equal to or lower than basic EPS. Diluted EPS is generally considered the more conservative and realistic figure, since it reflects the dilution shareholders could realistically face.

Data sites also show EPS from continuing operations, which leaves out the results of any business the company is selling or has closed, and normalized EPS, which removes one time items such as writedowns and restructuring charges.