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Earnings Per Share - EPS

Updated on October 16, 2019 , 261 views

What is Earnings Per Share - EPS?

Earnings per share (EPS) is the portion of a company's profit allocated to each share of common stock. EPS serves as an indicator of a company's profitability. It is common for a company to report EPS that are adjusted for extraordinary items, potential share dilution. EPS is a financial ratio, which divides net earnings available to common shareholders by the total outstanding shares over a certain period of time.

EPS

Earnings per share or EPS is an important financial measure, which indicates the profitability of a company. It is calculated by dividing the company’s net income with its total number of outstanding shares. It is a tool that market participants use frequently to gauge the profitability of a company before buying its shares.

EPS Formula

Earnings per share can be calculated in two ways:

  1. Earnings per share: Net Income after Tax/Total Number of Outstanding Shares

  2. Weighted earnings per share: (Net Income after Tax - Total Dividends)/Total Number of Outstanding Shares

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EPS is very important tool for investors, it should not be looked at in isolation. EPS of a company should always be considered in relation to other companies in order to make a more informed and prudent investment decision.

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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