Earnings Per Share (EPS)
Earnings per share is net income divided by shares outstanding: how much profit each share earned during the period. It is the most closely watched number in any earnings report, and it is also the denominator of the P/E ratio.
How to read it
The figure to look at is usually diluted EPS, which adds stock options, convertible bonds and anything else that could turn into shares to the share count. It is the more conservative number.
Companies generally report on both a GAAP and a non-GAAP basis, and analyst consensus estimates mostly correspond to non-GAAP. When judging whether a company beat, make sure both numbers are on the same basis.
EPS can grow because profits grew, or because buybacks shrank the share count. The two are not equal in quality: buyback-driven growth does not mean the business got better.
Common pitfalls
- One-time items (asset sales, legal settlements, tax adjustments) can send GAAP EPS for a single quarter sharply up or down, so reading one quarter in isolation is an easy way to misjudge a company.
- Companies with multiple share classes (Class A and Class B, for example) report EPS separately for each class, and the values can differ.
On FinDog
EPS is the first line of the scorecard in every earnings analysis: the actual figure, the consensus estimate, and how far above or below it came in. The "Recent Earnings" table on each stock page lists actual versus expected for every quarter.
Read the latest analyses →Related terms
- Non-GAAP EarningsGAAP stands for U.S. Generally Accepted Accounting Principles. Non-GAAP figures are "adjusted" numbers that a company calculates itself by starting from GAAP and excluding certain items, most commonly stock-based compensation, amortization of acquired intangibles and restructuring charges.
- Consensus EstimateThe consensus estimate is the average (or median) of the forecasts that sell-side analysts covering a company have made for metrics such as revenue and EPS. The market uses it as the baseline for deciding whether a report was "good."
- P/E RatioThe P/E ratio is the share price divided by earnings per share, which is the same as market cap divided by net income. It tells you how many years of earnings at the current level it would take to earn back the purchase price. TTM means the calculation uses trailing-twelve-month earnings.