Earnings Per Share (EPS)

Earnings Per Share (EPS) is a key measure of a company's profitability. It is calculated as a company's net income subtracted by preferred dividends, then divided by the average number of common shares outstanding. The resulting number serves as an indicator of a company's profitability.

A higher EPS indicates greater value because investors will pay more for a company's shares if they think the company has higher profits relative to its share price. EPS can be arrived at in several forms, such as excluding extraordinary items or discontinued operations, or on a diluted basis.