Earnings per share measures a company's profitability, indicating the profit earned for each outstanding share of stock. Higher EPS signifies higher profits.
Earnings per Share (EPS) is a financial metric that measures a company's profitability on a per-share basis. It indicates how much profit a company generates for each outstanding share of common stock. EPS is calculated by dividing net income (minus preferred dividends) by the weighted average number of outstanding shares during a specific period.
Formula: EPS = (Net Income - Preferred Dividends)/Weighted Average Shares Outstanding
For example, if a company has a net income of ₹1,000,000 and 200,000 shares outstanding, its EPS would be ₹5 (₹1,000,000 / 200,000).
EPS helps investors assess a company's profitability and compare company performance. Higher EPS typically signals better financial health, while lower EPS may suggest weaker profitability. EPS is also used to calculate the price-to-earnings (P/E) ratio.
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