Meaning
EPS is net income allocated to each share.
Formula
Net income / weighted average shares outstanding
Practical reading
Rising EPS can support valuation, but dilution, buybacks and one-off items should be checked.
Calculation detail
Basic EPS = profit available to common shareholders / weighted-average common shares. Diluted EPS also reflects potential shares from options, convertibles or similar instruments when they reduce EPS.
What to check
Track both EPS growth and the share count. Profit growth accompanied by a stable or falling share count is different from growth created mostly by buybacks.
Limits and caveats
EPS can rise even when total profit is flat if the company repurchases shares; it can fall through dilution despite a growing business.