What does EPS (Earnings Per Share) mean?

EPS is a company's profit divided by its number of outstanding shares — it's the per-share profit figure that feeds directly into the P/E ratio.

Earnings per share = net income ÷ shares outstanding. It's the per-share slice of a company's profit, and it's the denominator in the P/E ratio (price ÷ EPS). Rising EPS over time is one of the clearest signs a company is actually growing, not just its stock price.

EPS (Earnings Per Share) example

A company that earns $2 billion in a year and has 1 billion shares has EPS of $2. If it buys back 100 million shares and profit stays at $2 billion, EPS rises to about $2.22 — with no extra profit at all.

Common beginner mistake

Comparing EPS between companies. $5 EPS isn't better than $2 EPS on its own; what matters is EPS relative to the share price and how it's growing.