What is Earnings Per Share?
Quick Answer
Earnings Per Share (EPS) is a financial metric that represents the portion of a company's profit allocated to each outstanding share of common stock, indicating a company's profitability.
" EPS: Because who doesn't want to know how little they're actually earning from those pricey stocks? "
BORING DEFINITION
Earnings Per Share (EPS) is a financial metric that represents the portion of a company's profit allocated to each outstanding share of common stock, indicating a company's profitability. It is calculated by dividing the company's net income by the number of outstanding shares. EPS is often used by investors to assess a company's performance and compare it with peers.
How Does Earnings Per Share Work?
To calculate EPS, you divide the net income available to common shareholders by the weighted average number of common shares outstanding during the period. Adjustments may be made for preferred dividends if applicable. This calculation provides insight into how effectively a company generates profit per share.
Why it matters: Understanding EPS helps investors evaluate a company's financial health and compare its profitability with competitors. It is crucial for making informed investment decisions.
REAL WORLD EXAMPLE
> Company XYZ reported an EPS of $3 this quarter, meaning each share earned $3 in profit. Investors were pleased as it exceeded analysts' expectations.
Frequently Asked Questions About Earnings Per Share
(1) What does Earnings Per Share mean? +
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π Today's Candidates for Earnings Per Share
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