What Is EPS (Earnings Per Share)? Formula and How to Calculate It
EPS is one of the first numbers people look at in a company's report. Here's how to calculate it, what it shows and where it can mislead you.
What it is
EPS (Earnings Per Share) is the profit attributable to one share. The formula is simple:
EPS = net income ÷ number of shares
A company earned $500 million and has 100 million shares — EPS is $5. Reports often also show diluted EPS, which accounts for employee stock options and convertible securities. It's usually slightly lower.
Why look at it
| Metric | How it relates to EPS |
|---|---|
| P/E | Share price ÷ EPS |
| EPS growth | Earnings per share rise year after year |
| Buyback | Fewer shares — higher EPS |
Where's the catch
- One-off income, such as selling a building, inflates EPS for a single year.
- A buyback raises EPS even without business growth.
- Look at the trend over several years, not a single quarter.
More in the financial ratios and screeners lesson and the article how to read a company's financial statements.
Aspiro Invest — a medium-term portfolio: what to hold, when to review it and where the protective levels are.
- EPS is net income per share.
- P/E = price ÷ EPS.
- Look at the trend over several years.
Frequently asked questions
Where can I find a company's EPS?
In the income statement and on financial websites. A list of sources is in the article “where to find company data.”
Can EPS be negative?
Yes, if the company has a loss. Then P/E becomes meaningless, and the company is valued using other metrics.
What does “EPS beat expectations” mean?
Analysts publish forecasts in advance. If actual earnings come in higher, the share price may rise, but not always.
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