Earnings per share

The simplest form of Earnings per share is calculated like this: Earnings per share = Profit/(Number of shares). As number of shares can differ from period to period, weighted average can be used. For example, if there were 1000 shares outstanding for 3 months and 2000 shares outstanding for 9 months then weighted average of common shares is equal to 0.25x1000 + 0.75x2000 = 1750. If the total profit is 2000$, then Earnings per share would be
EPS = 2000$/1750 = 1.14$. The main idea is to calculate how much profit each share generates. In general, the greater EPS the better. Of course, this parameter alone is not sufficient to compare two companies. Based on the period that we observe we can have Trailing EPS that is based on last years figures, Current EPS that is based on this years figures and projections until the end of the year. The Future EPS is projection entirely.

EPS can be used to compare two companies, but in this model the cost of a share is not taken into account. For example if two shares have the same EPS, but one of them is 100$ and another one is 200$. The first share generates the same profit for less money. Also, average EPS is different for different industries.

This measure of a company's financial health is available from the quarterly 10K reports that publicly traded companies must report. The reports can be found on the Internet: http://www.sec.gov/edgar/searchedgar/webusers.htm.