Earnings per share divides net income by shares outstanding. It's the per-share profit figure that almost every other valuation ratio — P/E, PEG, EPS growth — is built on top of.
The formula
Net IncomeShares Outstanding
= EPS
Why it matters
- —It's the denominator of the P/E ratio — a rising EPS with a flat share price is a P/E quietly getting cheaper.
- —EPS can be flattered by share buybacks (fewer shares, same profit) even when the underlying business isn't growing.
- —Analysts track 'EPS surprise' — actual EPS versus forecast — as a signal of management's ability to deliver on guidance.
How to read it
| Declining | Profit is shrinking, or share count is rising (dilution) |
| Steady growth | Healthy, sustainable earnings trend |
| Spiking | Check for one-off items before assuming it's repeatable |