Earnings Per Share
There are several “earnings” figures reported by a corporation to its investors. Basically, there are three: net income, earnings per share, and diluted earnings per share.
Net income for a quarter or year is the total profit on an after-tax basis. Since any stockholder only owns an extremely small fraction of even 1% of the company, investors will likely want to look at one of the two figures of earnings per share.
Net income divided by the number of outstanding shares represents earnings per share (EPS). Sometimes, this can be a misleading number if there are investors or company employees who have rights to shares and such rights have not yet been exercised (i.e., warrants or options). Fully diluted earnings per share take into account all outstanding shares plus all shares represented by warrants or options not yet exercised.
Some publications, such as The Wall Street Journal, Barron’s, and MarketWatch.com, use fully diluted earnings per share in their stories and reporting. This is considered a more conservative measure of a company’s profit than just EPS.