Earnings per share
• EPS, as it is called, is a company's profit divided by its number of outstanding shares. If a company earned $2 million in one year had 2 million shares of stock outstanding, its EPS would be $1 per share. The company often uses a weighted average of shares outstanding over the reporting term.
• Abbreviated EPS. The amount earned during the period on each outstanding share of common stock, calculated by dividing the period's total earnings available for the firm's common shareholders by the number of shares of common shares outstanding.
• Abbreviated EPS. The net income or profits (after taxes) divided by the number of shares of common stock outstanding. There are several kinds of EPS reported. Two of the most common are basic or diluted. Basic shares are fewer in number than diluted. For Basic EPS, net income is divided by the number of common shares outstanding. This produces a larger EPS number than when using a diluted number of shares. It is wise to consistently use either basic or diluted EPS in your stock analyses.
Another kind of EPS reported may be non-recurring EPS. This is used when a company has had an unusual, non-repeating occurrence that affected its earnings. Generally you would exclude this non-recurring event. However, you would want to understand any possible long-term consequences of the occurrence. Beware of companies whose earnings are erratic over time, negative, or declining in value. See also: Diluted EPS.
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