Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS is calculated as net income (the profit a company makes after paying all expenses and taxes) divided by the number of shares outstanding (total number of shares that a company has) during the same period. If the number of shares out in the market has changed during that period, a weighted average of the quantity of shares is used.

EPS is just one of the metrics to determine a company’s profitability. It is also a major component of another important metric, price per earnings ratio (P/E).