Glossary
EPS (Earnings Per Share)
A company's profit divided by the number of shares it has, so profit is expressed per slice of ownership.
Total profit is hard to compare between companies of different sizes, and it is not what a shareholder owns anyway. A shareholder owns shares, so dividing profit by the share count converts a company-wide figure into a per-share one. That is the whole idea.
Because there are two numbers in the calculation, EPS can move for two quite different reasons: the company earned more, or the share count shrank. A buyback reduces the share count and lifts EPS without the business earning an extra cent. Both are real, and they are not the same event.
You will see basic and diluted versions. Diluted EPS assumes that everything convertible into shares, such as employee stock options, actually converts, which spreads the same profit across more shares. It is the more conservative of the two and the one most reports lead with.
A company that lost money has a negative EPS, and when that happens the price-to-earnings ratio has nothing to divide by and simply cannot be calculated.
Learn this properly
Lesson 7: How to Read a Stock PageA walkthrough of the ConvictionStocks stock page layout and what each section tells you about a company.
See it on a real company
KO shows this figure on its pageWe label it "Earnings Per Share", and Wall Street calls it "EPS". The page is open to everyone, no account needed.
Related terms
- P/E Ratio (Price-to-Earnings)The share price divided by earnings per share: how many years of current profit you are paying for at today's price.
- Net IncomeWhat is left of revenue after every expense, interest payment, and tax has been subtracted: the bottom line.
- BuybackA company using its own cash to purchase its own shares on the open market, reducing the number outstanding.
- Earnings ReportA company's quarterly public account of what it earned and spent, filed with regulators and released on a set date.
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