**Earnings Per Share - EPS**

Earnings Per Share is the Net Income (profit) of a company divided by the number of outstanding shares.

For example if a company earned Rs. 2 million in one year and had 4 million shares of stock outstanding, its EPS would be Rs. 0.50 per share.

Earnings Per Share is the single most popular variable in dictating a share's price. EPS indicates the profitability of a company.

EPS can be calculated for the previous year ("trailing EPS"), for the current year ("current EPS"), or for the coming year ("forward EPS"). Note that last year's EPS would be actual, while current year and forward year EPS would be estimates.

*If company ABC reported earnings of Rs.100 million and had 20 million shares outstanding, the basic EPS would be Rs. 5 (Rs. 100 million earnings 20 million shares outstanding = Rs.5 per share). The figure is important because it allows analysts to value the stock based on the price to earnings ratio (or p/e ratio for short).*

Earnings per share (EPS) tells an investor how much of the company's profit belongs to each share of stock.

Earnings per share (EPS) tells an investor how much of the company's profit belongs to each share of stock.

**What are Diluted Earnings Per Share?**

Diluted earnings per share (Diluted EPS) takes the basic earnings per share figure one step further. Basic EPS only takes into account the number of shares outstanding at the time. Diluted EPS, on the other hand, estimates how many shares could theoretically exist after all stock options, warrants, preferred stock and / or convertible bonds have been exercised.

The theory goes that because some or all of these investments could be converted or exercised, the number of shares outstanding could increase at any time. This reduces the amount of a company's earnings each share is entitled to. In doing so, the price to earnings ratio becomes higher, and the stock appears more expensive.

In most cases, the diluted earnings-per-share figure is far more accurate estimation of the total earnings per share and receive special attention when valuing a company.