Earnings Per Share
Net income attributable to common shareholders divided by weighted average shares outstanding.
FAQs
What is the difference between basic and diluted EPS?
Basic EPS uses only currently outstanding shares. Diluted EPS adds all potentially dilutive securities—options, warrants, convertible notes—to the share count, giving a more conservative (lower) figure that reflects what EPS would be if all dilutive instruments were exercised.
Can a company grow EPS without growing earnings?
Yes. Companies can boost EPS by buying back shares, which reduces the denominator. If a company repurchases 10% of its shares while earnings remain flat, EPS rises by about 11%. This financial engineering can inflate EPS metrics without genuine business improvement.
Why is adjusted EPS reported alongside GAAP EPS?
Adjusted EPS removes one-time or non-cash items like restructuring charges, acquisition costs, and stock-based compensation to show underlying recurring earnings power. Investors use it to compare ongoing performance, though critics note that companies sometimes exclude recurring items to present inflated adjusted figures.
Related Terms
Price-to-Earnings Ratio
A valuation metric comparing a company's stock price to its earnings per share, indicating how much investors pay for each dollar of earnings.
Return on Equity
A profitability ratio measuring how much net income a company generates per dollar of shareholders' equity.
Net Margin
The percentage of revenue remaining as net income after all expenses including interest, taxes, and non-operating items.
Free Cash Flow
Cash generated from operations minus capital expenditures, available for debt, dividends, or reinvestment.