What EPS tells you
Owning one share means owning a tiny piece of the company. EPS answers a simple question: how much of this quarter's profit belongs to my piece?
Because it's measured per share, EPS lets you follow one company's profit over time even when its total share count changes. It's also the "E" in the P/E ratio, one of the most common ways to judge whether a stock is expensive.
How to calculate EPS
Preferred dividends are subtracted because that money goes to preferred shareholders first. Most companies have none, so in practice EPS is usually just net income divided by shares.
Companies typically use the weighted average share count for the period, since shares can be issued or bought back partway through a quarter.
Try it yourself
EPS lab
Change the profit and share count and watch what one share earns. Each coin is $0.50.
Move the sliders. More profit lifts EPS. More shares spread the same profit thinner.
EPS on earnings day
Before a company reports, analysts publish their EPS estimates. The average of those estimates is called the consensus. When results come out, the market compares the two in seconds.
Beat or miss?
Analysts expected $1.20 per share. Drag the reported EPS and see how earnings day would be described.
A beat doesn't guarantee the stock goes up. If the company lowers its forecast for next quarter, the price can still fall.
Basic, diluted and adjusted EPS
An earnings report often shows more than one EPS figure. Here's what each one means.
Basic EPS
Net income divided by the shares that exist today.
Diluted EPS
Also counts shares that could be created from stock options, warrants and convertible bonds. It's the more conservative number.
Adjusted (non-GAAP) EPS
The company removes items it considers one-time, like restructuring costs. Analyst estimates are usually based on this version, so check which one a headline is using.
Common mistakes
Comparing EPS between two companies
A $10 EPS isn't better than a $2 EPS if the first stock costs 10 times as much. Use the P/E ratio to compare across companies.
Ignoring buybacks
EPS can rise just because the company bought back shares. Check whether net income grew too.
Mixing up GAAP and adjusted EPS
A company can beat on adjusted EPS and miss on GAAP EPS in the same report.
Missing one-time gains
Selling a building or a business unit can inflate one quarter's EPS. Look for what will repeat.
EPS on Stockwhiz
Every earnings report on Stockwhiz shows reported EPS next to the consensus estimate, so you can see the beat or miss at a glance.
| Company | Reported EPS | Estimate | Result |
|---|---|---|---|
| Northwind Coffee (NWCF) | $1.32 | $1.20 | Beat +10.0% |
| Helio Grid Systems (HLGD) | $0.41 | $0.47 | Miss −12.8% |
| Brightpath Health (BPTH) | $2.05 | $2.04 | In line |
Sample rows with made-up companies. Live earnings data coming soon.
Check yourself
A company earns $200M in net income and has 50M shares. What is its EPS?
Frequently asked questions
There's no single good number. What matters is whether EPS is growing over time and how it compares with analyst estimates and the stock price (the P/E ratio).
Yes. If a company loses money, EPS is negative. Many young growth companies report negative EPS for years.
Traders also watch revenue, profit margins and guidance for future quarters. A weak forecast can outweigh a strong quarter.
In its quarterly earnings release and its 10-Q or 10-K filing with the SEC. Stockwhiz pulls it into each earnings report as soon as it's published.
Related terms
Sources and further reading
This guide was written using the following references.
Stockwhiz Learn is for education only and isn't investment advice. Examples use made-up companies unless marked as live data.