Earnings per share
Earnings Per Share (EPS).
An important key figure that tells you the amount of earnings that the company provides per share.
Earnings per share = Earnings/Number of shares
Earnings = Earnings after tax
Number of shares = reported outstanding shares
As a shareholder, you want to know the proportion of the profit you will receive per share.
Things to keep in mind
- The earnings-per-share figure is a good indicator of whether the company is profitable.
- The next step is usually to compare against the share price; this gives you the key figure P/E.
- Pay attention to whether the company increases the number of shares, as this would lead to a reduced earnings-per-share figure.