What Is Earnings Per Share (EPS)?
A company's net profit divided by the number of outstanding shares.
The Full Definition
Earnings per share (EPS) measures how much profit a company generates for each share of stock outstanding. It's one of the most widely used indicators of a company's profitability. Growing EPS over time generally indicates a healthy, expanding business. EPS is the denominator in the P/E ratio calculation and is heavily watched during quarterly earnings reports — a company that "beats earnings" has reported higher EPS than analysts expected.
Real-World Example
If a company earns $1 billion in net income and has 500 million shares outstanding, its EPS is $2. If the stock trades at $40, the P/E ratio is 20. EPS growing from $1 to $2 to $3 over three years is a strong signal of underlying business health.