Basic Earnings Per Share (EPS) tells investors how much of a firm's net income was allotted to each share of common stock. It is reported in a company's income statement and is especially informative for businesses with only common stock in their capital structures. EPS can be found by dividing a company's net income by the number of shares outstanding.For example, if Company A has 1,000 shares outstanding and earned $10,000 in net income during the year, then its EPS would be $10 ($10,000 / 1,000). This figure lets shareholders know how profitable their investment is on a per-share basis.Investors often use EPS as one metric to compare the profitability of different companies. A high EPS indicates that the company is generating strong profits for each share it owns while low EPS could signal that the business is not doing well on this front. Additionally, changes in EPS from one period to another can give shareholders clues about whether or not a company is improving or deteriorating financially.
