Earnings per share

Net profit divided by the number of shares outstanding - the portion of a company's profit attributable to each share.

Example

205m of net profit across 150 million diluted shares is 1.3667 per share.

Important

Earnings per share can rise with no improvement in the business, simply by reducing the share count. Always ask whether the numerator or the denominator moved.

Related terms

• Shares outstanding — The number of shares a company has issued and that are currently held by investors. The diluted figure adds shares that would exist if outstanding options and convertible instruments were exercised.
• Share buyback — A company purchasing its own shares in the market and cancelling them, so that the same earnings are divided among fewer shares and each remaining holder owns a larger proportion.
• Price-to-earnings ratio — The price of a share divided by the earnings attributable to it. An equity multiple, because both parts are measured after interest has been paid.
• Net profit — What remains after every cost, including interest and tax, has been subtracted from revenue. The bottom line of the income statement.

Lessons that explain it

• Where an equity return comes from: cash paid out, and cash kept in — Two sources, one pool. A company either hands you cash or reinvests it on your behalf - and a company that reinvests is not withholding your return. (11 min)

All 578 terms in the Investing glossary