Earnings Per Share
Definition
A company's net profit divided by the number of outstanding shares, representing the profit allocated to each share of stock.
Explanation
EPS is the most widely followed metric in equity analysis. Basic EPS uses the current share count. Diluted EPS includes the potential dilution from stock options, convertible bonds, and other instruments. Quarterly EPS is compared to analyst consensus estimates — beating estimates ('earnings beat') typically drives stock prices higher, while missing ('earnings miss') causes declines. Forward EPS uses analyst projections for the next 12 months and is the basis of the forward P/E ratio.
Formula
EPS = (Net Income - Preferred Dividends) / Weighted Average Shares Outstanding
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