Investing term
What is Earnings per share (EPS)?
Net income ÷ shares outstanding. The 'per-share slice' of the company's profit.
Earnings per share (EPS) is a company's net income divided by its number of shares outstanding — the slice of profit attributable to each share. If a company earns $100M and has 50M shares, its EPS is $2. It's the headline number markets react to each quarter and the earnings figure in the price-to-earnings ratio.
Because it's per-share, EPS can be moved by changes in the share count as well as in profit: buybacks reduce shares and lift EPS even if total profit is flat, while issuing shares dilutes it. That makes EPS growth a slightly different thing from profit growth — a company can grow EPS purely by shrinking its share count. EPS is also derived from net income, so it inherits all of net income's exposure to accounting choices and one-off items, which is why 'adjusted' EPS figures exist and why the quality of the earnings behind it matters as much as the number.
EPS is net income ÷ shares outstanding — the profit attributable to each share, and the earnings in a P/E. It can rise on buybacks alone, so check whether profit actually grew.
For example
A company earning $100M with 50M shares has an EPS of $2. Buy back 5M shares and, with the same profit, EPS rises to about $2.22 — higher per-share earnings from fewer shares.
Learn it by doing
That's Earnings per share (EPS) in theory — it clicks when you use it. Practise it hands-on in a free, interactive lesson (Stage 15, Valuation for Investors).
Try the free lesson →Why it matters to you
EPS matters because it's the per-share profit that drives valuations — the P/E ratio multiplies it, and quarterly results are judged against EPS expectations. But its per-share nature is also a subtlety worth knowing: EPS can rise on buybacks rather than a better business, and it carries net income's accounting flexibility. Reading EPS alongside share-count changes and the quality of the underlying earnings is what turns it from a headline into a meaningful measure.
⚠ Mistaking buyback-driven EPS growth for a better business
EPS can grow simply because a company buys back shares, spreading the same profit over fewer of them — not because the business earned more. Cheering rising EPS without checking whether total profit actually grew, or whether the buyback was done at a sensible price, can flatter a stagnant company. Look at profit growth and share count, not EPS alone.