What is earnings per share (EPS)?
Earnings per share (EPS) is a company's net income available to common shareholders divided by the average number of common shares outstanding during the period. Public companies report basic EPS and diluted EPS. Diluted EPS adds shares that could be created from options, convertible debt or warrants, so it is equal to or lower than basic EPS. EPS is the earnings figure analysts forecast most often.
Why it matters to a revenue leader
EPS is where the sales team's pricing and margin meet the share count. A quarter that hits revenue while selling at deep discounts can still miss on EPS. Revenue leaders own the top line, yet the CEO and CFO are often judged on EPS, which also depends on price, mix and the cost to sell. EPS is also the "E" in the price-to-earnings ratio, so it links sales results to the share price.
How to calculate it
EPS = (net income − preferred dividends) ÷ average common shares outstanding. Diluted EPS adds potential shares to the denominator. A common mistake is comparing basic EPS for one period with diluted EPS for another.
Example
Fictitious numbersA public mechanical services company earns net income of $48 million in a year and has no preferred stock. It averaged 40 million shares outstanding, so basic EPS is $1.20. Options and restricted stock would add 2 million shares, so diluted EPS is $48 million ÷ 42 million, or about $1.14.
"How much do discounts and mix shifts on my team's deals move our EPS this year?"
Sources
- Earnings Per Share checked 9 Oct 2026
- Earnings Per Share (EPS): What It Means and How to Calculate It checked 9 Oct 2026