In one sentenceNet profit attributable to ordinary shareholders divided by the average number of shares outstanding, showing each share's portion of the profit.
Simply put
This measure is used in joint-stock companies, and IAS 33 requires it to be presented in the income statement. It helps the investor compare profit with the share's market price.
An increase in total profit does not always mean higher earnings per share: if the company issues new shares, the profit may be divided over a larger number and each share's portion falls.
Worked example
A joint-stock company made a net profit of 2,000,000 SAR, its average number of shares outstanding during the year was 1,000,000 shares, and it has no preference shares.
Net profit for ordinary shareholders2,000,000 SAR
Average number of shares1,000,000 shares
Earnings per share = 2,000,000 ÷ 1,000,0002 SAR per share
Formula: Net profit for ordinary shareholders ÷ average number of shares outstanding
Don't confuse it with
Dividends per shareEarnings per share is the share's portion of the whole profit, and dividends are what is actually paid to it in cash, which may be less.