What is EPS (Earnings Per Share)

Earnings Per Share (EPS) is a key financial metric that shows a company’s profitability per share of its stock. It helps investors understand how much profit a company makes for each outstanding share and is used to compare companies within the same sector.

EPS Formula

EPS=Net Profit After Tax−Preferred DividendsTotal Outstanding SharesEPS = \frac{\text{Net Profit After Tax} – \text{Preferred Dividends}}{\text{Total Outstanding Shares}}

Types of EPS

1️⃣ Basic EPS – Uses total outstanding shares.
2️⃣ Diluted EPS – Adjusted for convertible securities (stock options, bonds, etc.).
3️⃣ Trailing EPS – EPS for the past 12 months (TTM – trailing twelve months).
4️⃣ Forward EPS – Estimated EPS for the future.

Why is EPS Important?

✅ Higher EPS = Higher profitability per share.
✅ Used to compare companies in the same industry.
✅ Helps in stock valuation using the P/E ratio (Price-to-Earnings Ratio).

Example Calculation

• Net Profit = ₹1,000 crore
• Outstanding Shares = 100 crore

EPS=1000100=₹10EPS = \frac{1000}{100} = ₹10

EPS & Stock Valuation

📌 High EPS suggests strong profitability.
📌 Low EPS may indicate weak earnings.
📌 Used with P/E Ratio for valuation:

P/E=Stock PriceEPSP/E = \frac{\text{Stock Price}}{\text{EPS}}

Would you like an analysis of high EPS stocks in India or how to use EPS for stock selection? 😊