What is EPS and diluted EPS ?

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EPS is the portion of a company’s profit that is allocated to every individual share of the
stock. It is a term that is of much importance to investors and people who trade in the
stock market. The higher the earnings per share of a company, the better is its
profitability.

EPS – PAT/ TOTAL NO. O/S SHARES

Diluted EPS

Diluted EPS considers what would happen if dilutive securities were exercised. Dilutive
securities are securities that are not common stock but can be converted to common stock
if the holder exercises that option. If converted, dilutive securities effectively increase the
weighted number of shares outstanding, and this in turn decreases EPS, because the
calculation for EPS uses a weighted number of shares in the denominator.