Earnings per Share financial definition of Earnings per Share. Earnings per Share finance term by the Free Online Dictionary.

Earnings per share (EPS)

A company's profit divided by its number of common outstanding shares. If a company earning $2 million in one year had 2 million common shares of stock outstanding, its EPS would be $1 per share. In calculating EPS, the company often uses a weighted average of shares outstanding over the reporting term. The one-year (historical or trailing) EPS growth rate is calculated as the percentage change in earnings per share. The prospective EPS growth rate is calculated as the percentage change in this year's earnings and the consensus forecast earnings for next year.

earnings per share (EPS)

An earnings measure calculated by subtracting the dividends paid to holders of preferred stock from the net income for a period and dividing that result by the average number of common shares outstanding during that period. EPS is the amount of reported income, on a per-share basis, that a firm has available to pay dividends to common stockholders or to reinvest in itself. As with other financial measures, EPS can vary with differing accounting techniques; therefore, reported EPS may give a very misleading signal as to how the firm is really doing. Also called income per share, net income per share. See also basic earnings per share, diluted earnings per share.

Case Study Companies often release several versions of earnings per share to the investment community. In October 2001 telecommunications company Convergys Corporation, a 1998 spinoff from Cincinnati Bell, announced its third-quarter operating earnings rose 12% to 31¢ per share from the prior year's 27¢ per share. At the same time the firm announced that cash earnings per share, excluding goodwill amortization and special items, increased 13%, to 35¢ from 31¢ during the year earlier period. However, earnings per share calculated according to generally accepted accounting principles specified by the Financial Accounting Standards Board were reported as 2¢ per share, down over 90% from 27¢ per share a year before. The shareholders' quandary is determining which measure of earnings per share most accurately represents the company's performance. Companies would like you to focus on the earnings report that is most favorable to the company and its management. In this instance investors must have considered operating income the most important measure of the firm's performance because Convergys stock closed up $1.80 at $28.00. A month later the stock was trading in the low 30s.

Earnings Per Share

In a given fiscal year, a publicly-traded company's profit divided by the number of shares outstanding. This is considered the single most important aspect in determining a share's price and value, because the calculation of earnings per share shows the amount of money to which a shareholder would be entitled in the event of the company's liquidation. In general, earnings per share applies only to common shares. It is calculated thusly:

Earnings per share = (Net income - Preferred dividends) / Average shares outstanding.

Earnings per share (EPS). Earnings per share (EPS) is calculated by dividing a company's total earnings by the number of outstanding shares.

For example, if a company earns $100 million in a year and has 50 million outstanding shares, the earnings per share are $2.

Earnings per share can also be calculated on a fully diluted basis, by adding outstanding stock options, rights, and warrants to the outstanding shares.

The results report what EPS would be if all of those options, rights, and warrants were exercised and the company had to issue more shares to meet its obligations.

Earnings and other financial measures are provided on a per share basis to make it easier for you to analyze the information and compare the results to those of other investments.

Earnings per Share (EPS)

What Does Earnings per Share (EPS) Mean?

The portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability. It is calculated as follows:

In the EPS calculation, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period. Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number.

Investopedia explains Earnings per Share (EPS)

Earnings per share generally is considered the single most important variable in determining a share's price. It is also a major component of the price-to-earnings valuation ratio. For example, assume that a company has a net income of $25 million. If the company pays out $1 million in preferred dividends and has 10 million shares for half of the year and 15 million shares for the other half, the EPS will be $1.92 (24/12.5). First, the $1 million is deducted from the net income to get $24 million, and then a weighted average is taken to find the number of shares outstanding (0.5 × 10M + 0.5 × 15M = 12.5M). An important component of EPS that often is ignored is the capital that is required to generate the earnings (net income) in the calculation. Two companies could generate the same EPS, but the one that could do so with less equity (investment) would be more efficient at using its capital to generate income and, all other things equal, would be a “better” company. Investors also need to be aware of earnings manipulation that may distort EPS. Therefore, do not rely on any one financial measure; use statement analysis and other measures as well.