Earnings per common share
Earnings per common share (EPS) is a measure of profitability that shows how much of a company’s profit is assigned to each of its common shares.
EPS is calculated as follows:
Number of commons shares outstanding
Companies often set EPS targets to provide profit expectations for their shareholders. They can then measure and report actual performance against the target.
EPS is also a factor in setting the price per share of publicly traded stocks—often together with dividends per share.
More about earnings per share
In the example below, ABC Co. has earnings after tax of $20,000, preferred dividends of $3,000, and 100,000 outstanding common shares. Its earnings per share are:
100,000 = $17,000
100,000 = 17 cents
It means that if ABC Co. were to distribute 100% its profits to its common shareholders, each person would receive 17 cents for each share held.