EPS (Earnings Per Share)

The formula

EPS = Net Profit ÷ Number of Shares. The profit used is what is left for shareholders after all costs, interest and tax. Dividing it across every share puts companies of different sizes on a comparable footing.

Why EPS matters

EPS turns a large company-wide profit figure into something that can be set beside the price of one share. That is exactly what the P/E ratio does: the share price divided by the EPS tells you how much you are paying today for each rupee of profit.

A rising EPS over several years usually means the profit per share is growing, either because profit is growing or because the share count is falling.

Basic and diluted EPS

Company results often show two versions. Basic EPS uses the shares that exist today. Diluted EPS also counts shares that could be created later, for example from employee share options, so it is usually the more cautious figure.

What EPS does not tell you

EPS says nothing about the share price, debt, or how the profit was earned. Two companies with the same EPS can be very different businesses, so read it together with other ratios, not on its own.

Common questions

What is the full form of EPS?

Earnings Per Share.

How is EPS calculated?

Net profit divided by the number of shares.

Is a higher EPS always better?

Not by itself. It shows profit per share, but not how the profit was earned, how much debt the company carries, or whether the price is fair.

What is the difference between EPS and P/E?

EPS is the profit behind one share. P/E divides the share price by EPS to show how much you pay for each rupee of that profit.

Related terms

• P/E ratio
• Net profit
• Share
• ROE (Return on Equity)
• Market cap (Market Capitalisation)

Part of these topics

• Reading a company

Compared with

• Price vs value
• Revenue vs profit