What does EPS stand for in finance?

Earnings Per Share, often abbreviated as EPS, is a crucial financial metric used by investors and analysts to assess a company's profitability on a per-share basis. It provides insight into how much profit a company generates for each outstanding share of its common stock, allowing for easier comparison between companies of different sizes or in different industries.

EPS is calculated by dividing the net income of a company by the weighted average number of outstanding shares during a specific time period, typically a quarter or a year. A higher EPS indicates a more profitable company and is often viewed favorably by investors, as it can lead to higher dividends and a greater potential for stock price appreciation.

Understanding EPS is vital for evaluating investment opportunities, as it not only reflects a company's performance but is also a common input in the price-to-earnings (P/E) ratio, which investors use to determine the relative value of a company's shares. Thus, EPS serves as an essential tool in financial analysis and investment decision-making.