What is EPS (Earnings Per Share)?
Earnings Per Share (EPS) = Net Income ÷ Weighted Average Diluted Shares Outstanding. Two main flavors: GAAP EPS (reported under accounting standards) and adjusted/non-GAAP EPS (excludes one-time items, stock comp, M&A costs). Companies typically guide and analysts forecast non-GAAP EPS. Diluted EPS includes the effect of options, RSUs, and convertibles that could become shares.
Why it matters for investors
EPS surprises drive stock prices. A "beat" on EPS (actual > consensus) typically pushes the stock up; a "miss" pushes it down. The Price-to-Earnings (P/E) ratio = stock price ÷ EPS — the most-cited valuation metric. Forward EPS estimates and how they evolve over time signal analyst sentiment.