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What is earnings per share (EPS)?

Earnings per share (EPS) is a financial metric that represents the portion of a company's profit allocated to each outstanding share of its common stock. It's calculated by dividing the company's net income (after deducting preferred dividends and any adjustments) by the total number of outstanding shares.

The EPS figure is an important indicator used by investors, analysts, and financial institutions to assess a company's profitability on a per-share basis. It provides insight into how much profit a company is generating for each share of its stock.

EPS is often used in financial analysis and comparison between companies within the same industry or sector. It can be reported on a trailing twelve months (TTM) basis, which considers the past 12 months' earnings, or on a quarterly or annual basis, depending on the reporting cycle of the company.

There are different types of EPS, such as basic EPS and diluted EPS. Basic EPS calculates earnings per share using the total outstanding shares, while diluted EPS takes into account potential dilution from convertible securities like stock options, convertible bonds, or other instruments that could increase the number of outstanding shares.

Investors typically consider higher EPS as a positive indicator, reflecting higher profitability and potential returns for shareholders. However, it's important to analyze EPS in conjunction with other financial metrics and factors to get a comprehensive understanding of a company's financial health and performance.
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