earnings per share (EPS)

The net income of a firm (minus preferred dividends) divided by the number of common stock shares outstanding. Net income is the income available to all shareholders after all expenses have been taken into account. Earnings per share evaluates earnings stability and the trend in earnings when compared over each quarter or year. If a company has convertible bonds or shares, stock options and warrants, diluted earnings per share are calculated. Earnings per share reported by a company must meet the generally accepted accounting principles (GAAP). Adjusted earnings, or “pro-forma” earnings, is a non-GAAP figure calculated by company management or analysts that leaves out one-time expenses such as restructuring and merger costs, losses at affiliates and goodwill write-downs; management may also leave out depreciation, amortization and stock-based employee compensation.