What is Earnings Per Share (EPS)?
Nexa Consultancy | Startup & Finance Glossary
Earnings Per Share (EPS) is the portion of a company's profit that is allocated to each outstanding share of common stock. It is a widely used indicator of a company's profitability and is a key component in calculating the P/E ratio.
For Startups: EPS is generally not a relevant metric for early-stage startups, as they are typically not profitable and are focused on growth rather than generating earnings. The concept becomes more important as a startup matures and approaches an Initial Public Offering (IPO), at which point public market investors will scrutinize its EPS.
Calculation: EPS = (Net Income - Preferred Dividends) / Average Outstanding Common Shares.
Example: A public company reports a net income of ₹1 Crore and has 50 Lakh outstanding shares. Its EPS is ₹2.