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: Net income / Shares outstanding.

Companies usually report two versions. Basic EPS uses the actual number of shares currently outstanding. Diluted EPS uses a higher share count that includes shares which could be created later through stock options or convertible securities, 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 maximum dilution shareholders could eventually face.