Earnings per share (EPS) are the portion of a company's profit allotted to each outstanding share of the common stock.
Importance of Earnings per share or EPS
EPS is an important financial measure, the one which serves as an indicator of a company's profitability. It can be easily calculated by dividing the company's net income by its total number of outstanding shares.
Earnings Per Share = Net Earnings / Outstanding Shares
Suppose the company's net earnings for the previous year was $10,000 and the number of shares outstanding is 1000, which equals an EPS of 10, then according to the formula ($10,000 / 1000 = 10).