Earnings Per Share (EPS)

Search Dictionary

Definition of 'Earnings Per Share (EPS)'

Earnings per share (EPS) is a measure of a company's profitability. It is calculated by dividing a company's net income by the number of its outstanding shares.

EPS is an important metric for investors because it tells them how much money a company is making per share of stock. A high EPS indicates that a company is profitable and is likely to continue to be profitable in the future. A low EPS indicates that a company is not profitable and may be in financial trouble.

EPS can be used to compare companies within the same industry. A company with a higher EPS than its competitors is generally considered to be more profitable. However, it is important to note that EPS can be manipulated by companies through accounting practices. Therefore, it is important to look at other financial metrics when evaluating a company's profitability.

In addition to being used to evaluate a company's profitability, EPS can also be used to calculate a company's price-to-earnings ratio (P/E ratio). The P/E ratio is a measure of how much investors are willing to pay for a company's stock based on its earnings. A high P/E ratio indicates that investors are willing to pay a premium for a company's stock because they believe that the company will continue to be profitable in the future. A low P/E ratio indicates that investors are not as confident in the company's future prospects.

EPS is a valuable metric for investors, but it should be used in conjunction with other financial metrics to get a complete picture of a company's financial health.

Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 150 bonus reputation points for each definition that is accepted.

Is this definition wrong? Let us know by posting to the forum and we will correct it.