What are Earnings per Share (EPS)?

EPS is derived by taking the net income of a company and dividing it by the share price. That gives an individual investor an idea of how much growth was captured by their shares.

Earnings per share is one of the main articles that is announced by the quarterly reports given by companies to their investors. Earnings per share does not mean that each share has appreciated a certain amount, but if the quarterly reports in earnings seasons stir up demand for the shares based on solid fundamentals at a company, it can result in a higher price per share.

Instead, it is a calculation that takes the total net income of a company for a quarter or a year and divides it by the number of outstanding shares. What you’re left with is a notional amount of profit that shareholders have participated in, since shareholders are part-owners of a company.

Some of that growth may already have been priced into the shares by the market based on sentiment or some reports or intelligence that came out before the actual earnings report of the company. Companies announce their quarterly earnings per share with Earnings Calls and press releases. They also must file a publicly-accessible report with their numbers to the SEC every quarter and year.

If earnings per share increases over time, it is called earnings growth.