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Glossary
Earnings per share (EPS)
Definition
EPS is the company's profit divided by the number of its outstanding shares.
If a company earning USD 10 million in one year had USD 10 million shares of stock outstanding, its EPS would be USD 1 per share.
Companies often use a weighted average of shares outstanding over the reporting term when calculating EPS.
What is earnings per share (EPS)?
Earnings per share (EPS) is a financial ratio that calculates the portion of a company's profit allocated to each outstanding share of common stock. It's a key indicator of a company's profitability and is calculated by dividing the company's net income by the number of outstanding shares.
Why are earnings per share (EPS) important to consider when trading?
EPS is a widely used metric in stock analysis, as it provides a direct measure of a company's profitability on a per-share basis. Higher EPS indicates greater profitability and is often seen as a positive sign by investors. Traders use EPS to gauge a company's financial health and compare its performance with peers. It's also a key component in calculating the price-to-earnings (P/E) ratio, another important investment valuation metric.