Earnings Per Share

Earnings per share (EPS) shows how much of a company’s profit belongs to each outstanding share of stock. It is found by dividing total net income by the number of shares, because the profit is being spread across all shares that investors own. A higher EPS usually means the company is generating more profit for each share, though it does not by itself tell you whether the stock is cheap or expensive.

Use EPS when comparing the profitability of companies, especially businesses with different numbers of shares outstanding. It is also useful when checking financial reports or evaluating how much profit is available per share to common shareholders.

• Using revenue instead of net income
• Dividing by total shares issued instead of shares outstanding
• Forgetting that EPS is usually reported per share, not as a total company profit