What does earnings per share (EPS) measure?

Earnings per share (EPS) is a crucial financial metric that measures the profitability of a company on a per-share basis for its common stock. Specifically, EPS indicates how much profit is attributable to each share of common stock, which helps investors assess a company's financial performance relative to its outstanding shares. This measure provides insight into a company's profitability and is commonly used by investors to evaluate a company's earnings potential and make comparisons with other companies in the same industry.

Revenue reflects the total income generated before expenses are deducted, while asset value pertains to the worth of a company's assets and does not directly relate to earnings. Dividends are distributions made to shareholders but do not indicate the company’s overall profitability on a per-share basis. By focusing on EPS, investors can better understand the amount of profit they effectively own in relation to their holdings, which is essential for making informed investment decisions.