Earnings Per Share (EPS)
Net income allocated to each outstanding share of common stock.
Definition
Earnings per share divides net income available to common shareholders by the weighted average number of shares outstanding. Diluted EPS accounts for the potential dilution from stock options, convertible securities, and other instruments that could increase share count.
Formula
EPS = (Net Income - Preferred Dividends) / Weighted Average Shares Outstanding
Why It Matters
EPS is the denominator in the P/E ratio and the primary measure analysts use to forecast earnings. Quarter-over-quarter EPS beats or misses drive significant stock price movements on earnings announcement days.