Earnings per share
By Jude Wallis
Earnings per share is profit available to common shareholders divided by the number of shares outstanding. Basic EPS uses shares issued, diluted EPS assumes convertible claims convert.
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Two adjustments make the figure honest. Preferred dividends come out of the numerator, because that profit is not available to common shareholders. And the share count is a weighted average over the period, because a company that issued shares in November did not have them all year.
Diluted EPS is the more conservative reading. Options, convertible bonds and restricted stock all represent shares that can appear, and assuming they do shows the profit each existing share would be left with.
EPS is a per-share figure, so it moves when the share count moves. A buyback raises it without the business earning more, and a stock split divides it without anything changing at all. The EPS calculator is the division and how earnings per share works is the explainer.