Earnings per share (EPS) is a company’s net income divided by the number of shares of common stock outstanding.
EPS shows how much money a company earns from each of its shares, and is a widely used metric for evaluating corporate value.
Higher earnings per share indicate greater value, as investors will pay more for a company’s shares if they believe the company has a higher earnings relative to its share price.
Earnings per share can come in several forms, such as the elimination of extraordinary items or discontinued operations, or on a diluted basis.
Like other financial measures, earnings per share are most valuable when compared to those of competitors, companies in the same industry, or over a given period of time.