Earnings Per Share (EPS) — profit per share

Definition

Earnings Per Share (EPS) is company's net profit attributable to one share. It's a fundamental profitability indicator and base for calculating many other measures, including P/E and payout ratio.

Formula

EPS = (Net Profit − Preferred Dividends) / Average Number of Shares

Example: Company achieved 100 million PLN net profit, has 50 million shares.

EPS = 100 / 50 = 2.00 PLN

Types of EPS

Basic EPS

Basic version — net profit divided by number of shares outstanding.

Diluted EPS

Takes into account potential new shares from:

• Employee stock options
• Convertible bonds
• Warrants

Diluted EPS is always lower or equal to Basic EPS. It's more conservative (and safer) measure.

Trailing EPS vs Forward EPS

• Trailing EPS — for last 4 quarters (facts)
• Forward EPS — analysts' forecast for next 12 months (estimates)

EPS and P/E ratio

P/E = Share Price / EPS

If share costs 40 PLN and EPS is 2 PLN → P/E = 20. This means you "pay for 20 years of profits" for this company.

EPS Growth — earnings per share growth

For long-term investors, EPS trend is crucial:

• Growing EPS (5–15% annually) → company is developing
• Stable EPS → mature business
• Falling EPS → potential problem

Companies with steadily growing EPS can raise dividends and gain value.

What to watch out for

• Share buybacks artificially increase EPS (fewer shares = higher profit per share) — check if net profit also grows
• One-time events — asset sales, write-offs — distort EPS for individual quarters
• Compare within sector — EPS of bank and tech company are different worlds

How Freenance can help

Freenance displays EPS, P/E and earnings per share trend for companies in your portfolio. You see at a glance which companies are growing and which are slowing down.

👉 Analyze EPS with Freenance — freenance.io