What does earnings per share (EPS) tell investors?

Earnings per share (EPS) is a key financial metric that indicates the portion of a company's profit that is allocated to each outstanding share of common stock. This measure is crucial for investors as it provides insight into a company's profitability on a per-share basis, allowing for easier comparisons between companies of different sizes or across various industries. By focusing on EPS, investors can assess how well a company is performing in terms of generating profits relative to the number of shares that are available for investors. This helps them make informed decisions regarding the company's equity, as a higher EPS typically signifies better financial health and operational efficiency.