# Earnings per share (EPS)

Page written by AI. Reviewed internally on March 26, 2024.

### Definition

Earnings per share (EPS) is a financial metric that calculates the portion of a company’s profit allocated to each outstanding share of its common stock.

### What is earnings per share?

It is often used as an indicator of a company’s profitability and is calculated by dividing the company’s net earnings by the number of outstanding shares. EPS provides insight into how much profit a company generates for each share of its stock, which can be useful for investors and analysts evaluating a company’s financial performance.

Earnings per share is calculated using the formula:

ESP = Net income / Number of outstanding shares

### Example of earnings per share

Let’s consider a fictional company, XYZ Corporation, to illustrate earnings per share (EPS).

XYZ Corporation has a net income of ₦1 million for the fiscal year. The company has ₦500,000 outstanding shares of common stock.

ESP = ₦1,000,000 / ₦500,000 = ₦2

So, the earnings per share for XYZ Corporation would be ₦2. This means that for each share of common stock, the company earned ₦2 in profit during that fiscal year.