What does EPS stand for in financial analysis?

Earnings Per Share, commonly abbreviated as EPS, is a key financial metric used in the analysis of a company's profitability. It represents the portion of a company's profit allocated to each outstanding share of common stock. This measure is crucial for investors as it indicates how much money a company makes for each share of its stock, offering insights into financial performance and profitability.

EPS is calculated by dividing the net income of a company by the number of shares outstanding. A higher EPS often signifies a more profitable company and can lead to a higher stock price, making it an important indicator for potential investors when assessing the financial health of a business.

This metric is extensively used in financial statements and is a major component in various financial ratios, including the Price-to-Earnings (P/E) ratio, which compares a company’s current share price to its EPS. Understanding EPS helps investors make informed decisions regarding buying or selling shares.