What it is
EPS takes the year's net income and divides it by the number of shares outstanding, giving the per-share slice of profit. Quarterly EPS does the same for one quarter's profit.
Why people watch it
EPS lets you compare profitability per share across companies of wildly different sizes. It's also the denominator inside the P/E ratio.
Basic vs. diluted
- Basic EPS uses today's share count.
- Diluted EPS also counts shares that could exist — stock options, convertible bonds, employee restricted stock.
Diluted EPS is the more conservative number; most analysts cite it.