ATLASEarnings per share (EPS)
Investing glossary · Valuation and fundamentals
A company's profit for the period divided by its average number of shares outstanding.
Definition
Earnings per share (EPS) is the profit attributable to common shareholders divided by the average number of shares outstanding. It translates the company's total profit into the slice that belongs to a single share, which makes companies of different sizes comparable.
EPS is the E in the P/E ratio, so any change in EPS changes how expensive a stock looks. Growth in EPS can come from higher profit or from a shrinking share count, because buybacks spread the same profit over fewer shares. That is why investors look at where EPS growth is coming from.
Formula
EPS = (net income − preferred dividends) ÷ weighted average shares
EPS = (net income − preferred dividends) ÷ weighted average shares outstanding.
Worked example
Dividing the price of Microsoft (MSFT), $534.57, by its P/E of 28.5 gives earnings of about $18.77 per share over the last twelve months. With reported earnings growth of +31.6% over the previous year, that compares with roughly $14.26 a year earlier.
Look at the growth rate together with the P/E: a stock with fast EPS growth can deserve a higher P/E than one with flat earnings.
How ATLAS uses it
ATLAS displays earnings growth in the key numbers and uses earnings-based multiples when it estimates fair value through comparable companies.
Related in ATLAS: Financials →Browse all ATLAS tools →See it on a real stock
The example above uses these companies. Open their pages for the full numbers:
Frequently asked questions
What is the difference between basic and diluted EPS?
Basic EPS divides profit by the shares outstanding. Diluted EPS also counts shares that could be created by options, convertibles and similar instruments, so it is usually lower and more conservative.
Can EPS rise while the business gets worse?
Yes, if the company buys back many shares or has a one-off gain. That is why EPS should be read with revenue, margins and cash flow.
Related terms
Put the idea to work on your own stocks
Open any company in ATLAS to see its fair value, its odds of rising and its risk numbers side by side.
Try ATLAS →Not investment advice. ATLAS estimates are produced by statistical models from public data; they can be wrong and past performance does not predict future results. Consider your own situation before investing. Disclaimer