Earnings per share

A shareholder does not own a company's profit, they own a share of it. Earnings per share is that share, and it is the figure that connects the income statement to a price quoted per share.

It moves for two independent reasons: profit changes, and the share count changes. A company whose profit is flat can grow earnings per share indefinitely by buying back stock, and one whose profit is growing can show flat earnings per share while issuing shares to staff. Reading it without the share count beside it hides half the story.

Net income of $150m across 25m diluted shares.

1. 1150 / 25 = 6.00.
2. 2At a $120 share price, that is a P/E of 20x.

Every example in this glossary describes the same imaginary company, so the figures join up as you move between metrics.

• Use the diluted figure. Options and restricted stock already exist as claims, and the basic count pretends otherwise.
• Check whether growth came from profit or from a shrinking share count — both are real, but only one can continue indefinitely.
• Quarterly figures do not add to the annual one, and that is arithmetic rather than error: each quarter divides by its own average share count.

• It inherits every weakness of net income, including one-off items and accounting judgement.
• It says nothing about how much capital was needed to produce it.
• Comparing it between two companies is meaningless. Only the multiple placed on it is comparable.

Diluted EPS is carried as a statement line, with a sanity check that rejects figures a filer reported at the wrong scale. Its multi-year growth is one of four metrics in the scorecard's Growth category, carrying 25%. The quarterly view deliberately does not claim the four quarters sum to the year for this line, because they genuinely do not.

The full methodology covers where the figures come from, how the statements are normalised, and what is deliberately left unadjusted.