Earnings Per Share (EPS)

What is Earnings Per Share (EPS)? — Definition

EPS (Earnings Per Share) = Net Income / Shares Outstanding. If a company earns $1 billion in net income and has 500 million shares outstanding, its EPS is $2.00. EPS is the denominator in the P/E ratio and one of the most closely watched metrics by Wall Street — quarterly EPS results drive huge stock price moves on earnings day.

There are two versions: Basic EPS uses only current shares outstanding. Diluted EPS includes shares that could be created from stock options, warrants, and convertible bonds — this is almost always the more conservative and relevant figure for investors.

Example

If a company has a stock price of $60 and diluted EPS of $3.00, its P/E ratio is 20x. If EPS grows to $4.00 while the P/E stays the same, the stock would trade at $80 — a 33% gain purely from earnings growth.

EPS growth is one of the core metrics tracked in BMInsider's 100X Insider Reports when identifying companies with compounding earnings power.