Financial modelling terms explained

# Earnings per Share (EPS)

Earnings per share (EPS) is a key metric that public companies report to reflect the financial performance of their businesses. EPS is calculated by dividing net earnings by the number of shares outstanding.

## What Is Earnings per Share?

Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock. EPS is computed by dividing a company's net income by the number of shares outstanding. EPS represents the portion of a company's profit that is attributable to each share of common stock. It is used to calculate the price-to-earnings (P/E) ratio, which is used to measure a company's valuation.

## How Do You Calculate Earnings per Share?

Earnings per share is a calculation of a company's profits that are divided by the number of shares outstanding. This calculation gives investors an idea of how much money each share of the company is making. The calculation starts with the company's net income, which is the company's profits after taxes and expenses. This number is then divided by the number of shares outstanding. This calculation gives investors an idea of how much money each share of the company is making.

## Who Uses Earnings per Share?

Earnings per share (EPS) is a financial metric used to measure a company's profitability. It is calculated by dividing a company's net income by the number of shares outstanding. EPS is used to assess a company's performance and to compare it to other companies. It is also used to calculate the price to earnings ratio, which is used to measure a company's valuation.

## What Do You Have to Watch Out for When You're Using Earnings per Share?

There are a few things to watch out for when using EPS. One is that it can be affected by accounting choices made by a company, such as the depreciation method it uses or the way it records stock options. Another is that EPS can be inflated by having a low number of shares outstanding, since this means each share is worth more. And finally, EPS can be misleading if a company is losing money but still has positive EPS due to one-time or unusual items.

### Get started today with Causal

Start building your own custom financial models, in minutes not days.