Part of the guide: Financial ratios in plain language: margins, EPS, ROE, debt-to-equity and more
ExplainersEarnings per share (EPS) explained: basic, diluted and why it can change without profit changing
What EPS is, the difference between basic and diluted EPS, and how a split, bonus or new shares change it. A worked example with illustrative numbers.
Earnings per share (EPS) shows how much of a company’s profit belongs to each share. It appears in every results statement.
The formula
EPS = profit attributable to shareholders ÷ weighted average number of shares in the period.
For example, if profit after tax is ₹90 crore and there are 30 crore shares, EPS is ₹3.
Basic and diluted EPS
- Basic EPS uses the shares in issue.
- Diluted EPS also counts shares that could be created later, such as from employee stock options or convertible instruments. It is never higher than basic EPS.
Results statements show both. The gap tells you how many potential new shares exist.
Why EPS can change without profit changing
EPS depends on the number of shares as well as the profit:
- New shares issued: more shares share the same profit, so EPS falls.
- Buyback: fewer shares, so EPS rises for the same profit.
- Split or bonus: the number of shares rises, so EPS is restated on the new count. See dividends, splits and bonus issues explained.
Companies restate earlier EPS figures after a split or bonus so periods remain comparable.
What EPS does not show
It does not show cash, debt or the quality of profit. Compare EPS across periods for the same company; comparing EPS between companies is not meaningful because share counts are arbitrary. For a wider set of ratios, see financial ratios in plain language.