Earnings Per Share (EPS) is a financial metric that shows how much profit a company earns for each outstanding share of its stock.
Earnings Per Share (EPS) is one of the most important indicators used by investors to evaluate a company’s profitability and performance. It tells how much of the company’s net profit is allocated to each share.
The formula is:
EPS = (Net Profit − Preferred Dividends) ÷ Total Outstanding Shares
A higher EPS generally indicates better profitability and is often seen as a positive sign by investors. EPS is widely used in valuation metrics like the Price-to-Earnings (P/E) ratio, helping investors decide whether a stock is overvalued or undervalued.
There are different types of EPS:
EPS should be analyzed along with other financial metrics, as it does not provide a complete picture on its own.
"<p> If a company earns ₹10 crore in profit and has 1 crore shares outstanding, the EPS is:<br> <strong>₹10 crore ÷ 1 crore = ₹10 per share</strong> </p>"