1. What Is Earnings Per Share?
Earnings per share (EPS) is a company's net profit divided by the number of shares outstanding. It boils a company's entire bottom line down to a single per-share figure investors can compare over time.
EPS is the "E" in the P/E ratio and one of the most closely watched numbers in every earnings report.
2. Basic vs. Diluted EPS
Basic EPS
Uses the actual shares currently outstanding. Simple, but ignores securities that could become shares later.
Diluted EPS
Assumes all stock options, warrants, and convertible bonds are exercised, increasing the share count. A more conservative, realistic figure.
Which to use? Always favor diluted EPS. It reflects the worst-case share count and is what most analysts and financial sites, including WIT, use for valuation.
3. Why EPS Growth Matters
A single EPS figure means little on its own. What matters is the trend. Consistently rising EPS shows a company is growing its profits on a per-share basis — the ultimate driver of long-term stock returns.
Watch for growth that comes from real revenue and margin gains, not one-off events. Compare EPS across several years to separate genuine progress from noise.
4. How Buybacks Boost EPS
Because EPS divides profit by share count, a company can raise EPS simply by buying back its own shares — even if total profit stays flat. Fewer shares means each one gets a bigger slice.
Be skeptical: EPS growth driven by buybacks isn't the same as growth driven by a stronger business. Check whether net income itself is rising, not just the per-share figure.
5. Common Distortions
One-time gains
Asset sales or tax benefits can inflate a single quarter's EPS. Look for "adjusted" or "core" EPS that excludes them.
Non-recurring charges
Big write-offs can crush EPS temporarily, making a healthy company look unprofitable for one period.
Share count changes
New share issuance dilutes EPS; buybacks inflate it. Always note whether the share count is moving.
6. Using EPS on WIT
WIT stock pages show EPS alongside the P/E ratio. To use it well:
- Track EPS over multiple years to judge the growth trend, not a single number.
- Prefer diluted EPS for valuation.
- Pair it with the income statement to see what's driving the number.