Source: fool.com
The portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability.
EPS = Net Income - Dividends on Preferred Stock
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Average Outstanding Shares
An important aspect of EPS that's often ignored is the capital that is required to generate the earnings (net income) in the calculation. Two companies could generate the same EPS number, but one could do so with less equity (investment) - that company would be more efficient at using its capital to generate income and, all other things being equal, would be a "better" company.
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