EPS, or earnings per share, its most basic form is a company's earnings divided by the number of shares. It basically tells us a company's earnings which could be allocated to each common share. So if the company took all of its earnings, or profit, and distributed all of it to each shareholder, this is, in theory, what they could get. Now, it's a great indicator of profitability, so it's a great way to compare between companies. Thus, it's a widely used measure. If you can find similar companies, then it's great for comparison between peer groups, and if you've got EPS over time for one company, you can have a look at a trend and see if its EPS has improved over time. Lastly, it includes the effect of share issuances or repurchases. If a company has issued a lot of shares this year, then its denominator figure, the number of shares, will have gone up. So that should tell us that the EPS would go down. But again, if they've issued lots of shares, then the company will have received cash from those new shareholders. If the company invests that cash, then it should make more earnings. So the more equity they've got from shares, the more their earnings should be as well. One thing to watch out for is that EPS should be used in conjunction with a range of measures. For instance, let's say we were looking at two companies which had the same EPS. We might say that they're the same. However, just because they've got the same number of shares doesn't mean they've actually got the same equity. One of them could have invested far less equity but is still able to make very high earnings. Therefore, it's not a perfect measure. It should always be used with other measures.