Valuation · updated October 21, 2026
What is EPS (earnings per share) and how is it calculated
EPS shows how much profit the company made for each share over a period. It is the number everyone watches at each quarterly report, and the basis for P/E.
EPS formula
- Net profit
- What is left after all costs, interest and tax.
- Average number of shares
- The average share count over the period; diluted EPS also adds shares that may come from employee stock options.
Worked example
A company made a net profit of $2 billion and has 250 million shares.
Each share "earns" $8 a year. If the stock costs $120, the P/E is 15.
How to read EPS
The size of EPS means little on its own: $2 or $200 per share depends on how many shares there are. What matters is how EPS moves over time.
When EPS can fool you
Buybacks: EPS rises even when profit stands still, because it is split across fewer shares. One-off gains: selling a division inflates EPS for a single quarter.
Related terms
Questions about EPS
What is diluted EPS?
Profit divided by all shares, including those that could come from options and convertible bonds. It is the more cautious figure, and the one we use.
Where does estimated EPS come from?
From the average forecast of the analysts who follow the company for the next quarters or years.
These explanations are for information only. They are not a recommendation to buy or sell.
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