Earnings Per Share (EPS) is a measure of how much the company is earning for every share held. Earnings Per Share is an indicator of a company’s profitability and is calculated as follows:
(Net Income – Preferred Dividends)
Average Shares Outstanding
Earnings Per Share is considered by many to be the most important determinant of a share’s price and value because the calculation shows the amount of money to which a shareholder would be entitled if the company liquidated.