Earnings per Share Definition and Explanation

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Quick Definition

Measures company earnings created for each share of stock.

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Earnings per Share Formula

Explanation of Earnings per Share

The Earnings Per Share (EPS) compares Net Earnings to the Average Shares Outstanding, and is simply how much earnings have been generated per one share of stock during the period reported.

Importance of Earnings per Share

As a company’s earnings increase, Earnings per Share will look better, but keep in mind other things can affect Earning Per Share: share buybacks the company may conduct (resulting in less shares), or the company releasing more shares, which increases the number of total shares further diluting the Net Earnings.