Earnings per share (EPS) is a financial metric that indicates a company's profitability on a per-share basis. It is calculated by dividing the net income of a company by the number of outstanding shares of its common stock. EPS helps investors assess how much profit a company generates for each share they own, making it easier to compare performance across different companies. EPS can be reported in two forms: basic and diluted. Basic EPS uses the total number of outstanding shares, while diluted EPS accounts for potential shares that could be created from stock options or convertible securities. This distinction provides a more comprehensive view of a company's earnings potential, especially for investors considering stocks as part of their investment strategy.