Earnings Per Share (EPS)

Table of Contents

Calculation

Earnings per share (EPS) is calculated by dividing net income minus preferred dividends by weighted-average common shares outstanding.

Interpretation

Earnings per share is a profitability ratio that gives an idea about the net income a company generated per outstanding share. In general, investors want to see increasing earnings per share over time.

However, earnings can be deceiving, and the quality of earnings needs to be assessed before putting too much weight on both net income and earnings per share.

A more reliable measure of profitability is free cash flow, and free cash flow per share.

Similar Posts