What is EPS? A Complete Guide to Earnings Per Share

Let’s say you are new to the stock market. You keep hearing people say “EPS is good”, “EPS is low”, etc. You’re confused. What is EPS? Think of a company like a big pizza. Now, imagine each slice of that pizza represents one share of the company. EPS tells you how much profit is available for each slice (each share) of the company. So if a company earns ₹100 crore in profit and has 10 crore shares, each share gets ₹10 of that profit.

About EPS

EPS or Earnings Per Share tells you how much money a company makes for each share of its stock. It shows how profitable the company is and helps people understand how much profit each share earns.

Let's take an example, Infosys Ltd. has made a net profit of ₹24,000 crore in a year. It has 4,800 crore shares in the market.

So,
EPS = ₹24,000 crore / 4,800 crore shares = ₹5 per share

This means Infosys earned ₹5 per share.

How to Calculate the EPS?

Here is how to calculate the Earnings Per Share:

The formula of Earnings Per Share is:

Earnings per share = Net Income  -  Preferred Dividends / End of Period Common Shares Outstanding

Where, 

• Net Income = Business profit after all taxes, expenses, and interest.
• Preferred Dividends = The dividends paid to selected shareholders.
• End of Period Common Shares Outstanding = Total number of regular shares in the market.

Example of Earnings Per Share

For Example, suppose that a company has,

	Value
Net Income	₹10,000 crore
Preferred Dividends	₹500 crore
Outstanding	2,000 crore

Earnings per share = ₹10,000 - ₹500) / 2,000

= ₹9.75   

So the business Earnings Per Share is ₹9.75, which means each ordinary share earned ₹9.75 during the period.

Types of Earnings Per Share

Here are the types of Earnings Per Share:

Ongoing EPS (or Current EPS)

Earnings Per Share based on the current year's ongoing performance (not full year yet). Often based on quarterly results.

Use Case:
Useful for tracking performance during the year.

For Example:
Infosys reports net profit of ₹6,000 crore in Q1 and has 4,800 crore shares.

Ongoing Earnings Per Share for Q1 = ₹6,000 ÷ 4,800 = ₹1.25
Multiply by 4 to estimate full-year EPS = ₹5.00

Adjusted EPS

Earnings Per Share after removing one-time items like lawsuit costs, asset sales, etc. This gives a cleaner view of regular profits.

Use Case:
Good for checking how the company is doing in its normal business.

For Example:
Tata Motors sells a property and earns ₹1,000 crore extra.
Real profit = ₹9,000 crore (regular)
Adjusted Earnings Per Share = ₹9,000 ÷ shares
Reported Earnings Per Share (with one-time gain) = ₹10,000 ÷ shares

Investors prefer adjusted Earnings Per Share for real performance.

Reported EPS (or GAAP EPS)

Earnings per Share are shown in the official profit and loss statement, as per accounting rules.

Use Case:
Standard version. Includes everything, even one-time items.

For Example:
The Earnings Per Share number you see in a company’s annual report = Reported EPS.

Trailing EPS

Earnings Per Share based on the last 4 quarters (past 12 months), and the "TTM" stands for Trailing Twelve Months.

Use Case:
Used to calculate the PE Ratio and compare with other companies.

For Example:
If HDFC Bank earned ₹20,000 crore over the last 4 quarters, and has 2,000 crore shares:
Trailing EPS = ₹10

You will often see this on websites like Moneycontrol or Screener.in

Retained EPS

Part of Earnings Per Share that the company keeps (does not give as a dividend). This is used for future growth, projects, etc.

Formula:
Retained EPS = EPS - Dividend per Share

For Example:

• Infosys EPS = ₹50
• Dividend = ₹20
• Retained EPS = ₹30

Cash EPS

Earnings Per Share are based on cash profits, not accounting profits. This removes things like depreciation (which is just on paper).

Formula:
Cash EPS = (Net Profit + Depreciation) ÷ Shares

Use Case:
Shows the real cash-generating power of the company.

For Example:
Reliance Net Profit = ₹50,000 crore
Depreciation = ₹10,000 crore
Shares = 3,000 crore
Cash EPS = (50,000 + 10,000) ÷ 3,000 = ₹20

Book Value EPS

Earnings Per Share based on the company’s book value (total assets - total liabilities). Technically not a regular EPS type, but used to measure intrinsic value per share.

Use Case:
Helpful in banks and NBFCs.

For Example:
SBI’s book value per share = ₹350
Share price = ₹750
Book Value EPS tells you how much the share is worth on paper.

Quick Review of EPS Types

EPS Type	What It Shows	Best Use
Ongoing EPS	Earnings Per Share from the current quarter/year.	To track progress during the year.
Adjusted EPS	Earnings Per Share after removing one-time events.	Shows core performance.
Reported EPS	Official Earnings Per Share (with everything included).	As per accounting, as seen in the annual report.
Trailing EPS	Earnings Per Share of the last 12 months.	Used for the PE ratio, comparing companies.
Retained EPS	Earnings per Share are kept in the company after paying a dividend.	Shows how much is reinvested.
Cash EPS	Earnings Per Share from real cash profit (adds back depreciation).	Shows the cash power of the company.
Book Value EPS	Based on the book value of the company.	Used for valuing banks, NBFCs.

Why is EPS Important?

Earnings per Share is like the batting average of a company. Just like in cricket, you judge a player’s performance by average runs; Earnings Per Share helps you judge a company’s financial performance. Earnings Per Share Helps You Understand:

How much profit does each share earn?

Earnings per Share show how much money the company is making for each share. More EPS = more profit per share. Example: If EPS is ₹10, it means the company is earning ₹10 per share.

Is the company growing over time?

If EPS was ₹5 last year and ₹8 this year, it means the company is growing. Earnings Per Share going up = Good sign. Like a cricketer scoring more runs each match, shows form is improving.

Is investor money being used wisely?

You invest money expecting the company to use it well. A high and growing Earnings Per Share shows that the company is using its money to grow profits. It’s like giving a batsman a good bat, and he scores a century with it.

You can compare companies easily

Earnings per Share helps you compare two companies in the same sector. Example: Infosys EPS = ₹50, Wipro EPS = ₹20. Infosys is earning more per share. Just like comparing two cricketers by their averages.

Why Should Indian Investors Care About EPS?

Let’s say you want to invest in TCS or Wipro. Both are IT companies. How will you choose?

Suppose:

• TCS EPS = ₹100
• Wipro EPS = ₹20

This means TCS is earning more per share than Wipro.

But wait, look at Earnings Per Share in isolation. Compare it with the share price using a ratio called the P/E ratio (Price to Earnings).

PE Ratio = Share Price / Earnings Per Share

So, if:

• TCS share price = ₹3,000 - PE = 3000 / 100 = 30
• Wipro share price = ₹400 - PE = 400 / 20 = 20

In this case, Wipro might be cheaper, but not necessarily better. High Earnings Per Share + reasonable PE = good combo.

Conclusion

In conclusion, Earnings Per Share is not rocket science, it’s just a smart way to check how much each share of a company earns. It helps you compare, judge, and invest better. We hope this blog has been helpful to you.