MarketLearn
Chapter 18Intermediate~9 min

What EPS measures

Net profit divided by the number of shares — profit on a per-share basis.

Earnings per share, or EPS, is one of the most quoted numbers in investing. It answers a simple question: how much profit did the company earn for each share?

A company's total profit is called net profit — the money left after all costs, interest and tax. EPS spreads that profit across the shares investors hold. 'Outstanding shares' simply means the shares currently owned by investors.

EPS = Net profit ÷ Number of outstanding shares

A worked example

Suppose Nova Industries reports a net profit of ₹120 crore and has 24 crore shares outstanding. Divide the two: ₹120 crore ÷ 24 crore = ₹5. Each share therefore represents ₹5 of profit earned in that year.

Net profit
₹120 crore
Shares outstanding
24 crore
EPS
₹5.00

Notice that EPS does not tell you whether the share is expensive. Two shares with an EPS of ₹5 could trade at ₹50 or at ₹300. To judge price you need the next ratio in this course: the P/E ratio.

Earnings Per Share (EPS)

The profit attributable to each single share.

EPS = Net Profit ÷ Shares Outstanding

Earnings Per Share

₹10.00

EPS is a per-share view of profit. It rises when profit grows, and it falls if the company issues many new shares (dilution) faster than profit grows.

Why per-share?

EPS is a per-share figure, so it lets you compare a very large company with a small one on the same footing.

Read the fine print

EPS is an accounting number. It can be lifted by one-off gains — like selling a building — that will not repeat. Always check whether the profit came from normal operations.

Key takeaways

  • EPS = net profit ÷ number of outstanding shares.
  • EPS expresses total profit on a per-share basis so it can be compared with the share price.
  • A higher EPS does not automatically mean a better or cheaper investment.
  • One-off gains can flatter EPS, so check where the profit came from.

Check your understanding

Every answer comes with an explanation — the goal is understanding, not a score.

Question 1 / 30%

ABC Manufacturing earns a net profit of ₹100 crore and has 50 crore shares outstanding. What is its EPS?

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