Earnings per Share (EPS) = Net Income – Preferred Dividends
                                                         Average Outstanding Shares

Earnings per Share measure profitability on a per-share basis.  This earnings number is an important consideration when pricing a stock, and it is widely used in investment analysis.  It is also a component of the Price/Earnings multiple.

Keep in mind that one-time events such as asset sales and non-cash transactions such as depreciation may affect net income.  Because of this, the “earnings” figure in the numerator may not necessarily constitute an accurate portrayal of company operations or cash flow.

Earnings per share may improve (or become artificially inflated) when a company has recently purchased treasury stock or while earnings grow over time without the issuance of any new common stock.

Earnings per share may be “trailing” using the last twelve months of earnings or “forward” using projected earnings.