What does EPS stand for in the context of financial metrics?

Earnings Per Share, commonly abbreviated as EPS, is a crucial financial metric used to evaluate a company's profitability on a per-share basis. It represents the portion of a company's profit allocated to each outstanding share of common stock and is an important indicator for investors when assessing a company's financial health and performance over time.

Calculating EPS involves taking the net earnings of the company, subtracting any dividends paid on preferred stock, and dividing the result by the average number of outstanding shares. This metric allows investors to compare the earnings performance of different companies, regardless of their size, and helps in monitoring the earnings trend of the same company over different periods.

EPS is widely used in various financial analyses, including price-to-earnings (P/E) ratio calculations, which help investors determine if a stock is overvalued or undervalued compared to its earnings. Additionally, a rising EPS can indicate that a company is growing and potentially improving its profitability, which is a positive sign for investors and stakeholders.