EPS
Earnings per share shows how much of a company's earnings is attributable to each ordinary share.
Start the lessonIntroduction
Earnings expressed per share
EPS means earnings per share. It indicates how much of a company's earnings is attributable to each ordinary share over a reporting period. It is an accounting measure—not the share's market price and not necessarily the cash dividend an investor receives.
The short answer
EPS helps describe a company's earnings on a per-share basis. Read it alongside the company's reports, share count, and other measures.
The formula
Basic EPS formula
Basic EPS = (Net profit − preference dividends) ÷ weighted-average ordinary shares
The exact calculation and presentation follow applicable accounting standards. If a company has no preference shares or preference dividends, the numerator is generally the profit attributable to ordinary shareholders.
Weighted-average shares account for shares issued, bought back, or otherwise changed during the reporting period. Reported EPS may also be presented as basic or diluted EPS.
₹10 lakh example
Calculate a simple EPS
If earnings attributable to ordinary shareholders are ₹10 lakh and there are 2 lakh weighted-average shares, EPS is ₹5 per share.
Illustrative basic EPS
₹5 per share
(₹10,00,000 − ₹0) ÷ 2,00,000 shares
This is a simplified illustration, not a calculation of any particular company's reported EPS. Actual financial statements may include adjustments and distinguish basic from diluted EPS.
How to interpret EPS
Useful, but not the whole picture
- Compare EPS across periods, and check whether the calculation is basic or diluted.
- Changes in share count can affect EPS even if total profit has not changed by the same amount.
- One-off gains, losses, accounting choices, or a cyclical business can affect reported earnings.
- EPS is not the same as cash flow, share price, or dividend per share.
- A higher EPS alone does not establish that a share is fairly valued or that its price will rise.
Key points
What to remember
- EPS means earnings per share.
- Basic EPS uses earnings attributable to ordinary shareholders divided by weighted-average ordinary shares.
- Preference dividends may be deducted when relevant.
- EPS is not the same as the cash dividend paid per share.
- Share-count changes and one-off items can affect EPS.
- Consider EPS with other financial measures and company context.
This lesson is for education only, not personalized financial, tax, or investment advice. Investments in securities are subject to market risks.
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