The formula
EPS = net profit ÷ number of shares. If a company earns Rs 100 crore in a year and has 5 crore shares, EPS is Rs 20. A higher EPS means more profit per share.
A live example
Why EPS matters
- It shows how profitable the company is on a per-share basis.
- A rising EPS over several years usually signals a growing business.
- It is used to calculate the P/E ratio.
- It helps you judge how large a dividend the company could afford.
Things to check
- Quarterly or annual? Companies report each quarter. A quarterly EPS is about a quarter of the yearly figure, so make sure you compare like with like.
- Bonus shares. When a company issues bonus shares, the number of shares rises and EPS is adjusted. See bonus shares and dividends.
- One-off items. A single large gain or loss can distort one year.
- Trend, not a single number. Look at several periods.
EPS is not the share price
A company with EPS of Rs 30 is not automatically better than one with EPS of Rs 5. What matters is how the price compares with the EPS, which is the P/E ratio. Look at both.
For education only. Not investment advice.