Earning Per Share(EPS) is obtained by dividing the net income of a company by the number of its outstanding common shares. It has two other variants. In one variant dividends announced by the company are deducted from the net income before it is divided by the number of shares. Whereas, in the case of the other variant,  a number of convertible shares and warrants are added to the outstanding shares and then the net income is divided.

EPS is assessed quarterly and annually when the financial result of the company is declared. EPS helps to assess the profitability of the company and its per share net income. It is of  immense importance for assessment of a company for investment. Higher the EPS better the company. The EPS helps to identify companies whether the shares are of investment grade and if it is worthwhile to buy such shares. The increasing EPS from quarter to quarter over a period of time say for a period of two-three years is a criterion for good investment. Simultaneously, EPS of other companies in the same industry need to be compared for arriving at a decision for investment. But EPS alone can not be the determinant of stock selection. A company with annualized EPS of ₹2 may trade at ₹100 while another company with EPS ₹5 may well trade at ₹60. Generally companies with enduring business prospects claim higher market valuation than others.