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What is EPS, how is it calculated, how to use it in stock analysis — complete Hindi guide.
Published by The Retail Trader · AUG 05, 2026 · Features
What is EPS, how is it calculated, how to use it in stock analysis — complete Hindi guide.
The full form of EPS is Earnings Per Share. It tells how much profit per share the company has earned.
EPS = Net Profit / Total Shares Outstanding
Simple definition: > EPS = total profit of the company ÷ how many shares are there. Meaning how much profit was made on each share.
Example:
• TCS net profit: ₹45,000 crore (annual)
• Total shares of TCS: 365 crore
• EPS: ₹45,000 / 365 = ₹123 per share
Meaning: Every TCS share generated a profit of ₹ 123.
Keep these four points in mind:
• EPS is increasing — Meaning: Company's profit is growing, Action: Bullish signal ✅
• EPS is falling — Meaning: Company's profit is decreasing, Action: Bearish signal ❌
• EPS is stable — Meaning: Company is consistent, Action: Neutral
• EPS is negative — Meaning: Company is in loss, Action: Caution ⚠️
YEAR-OVER-YEAR growth of EPS is more important than absolute EPS:
EPS Growth Rate = (Current EPS - Previous EPS) / Previous EPS × 100
Keep these five points in mind:
• > 20% — High growth 🔥
• 10-20% — Good growth
• 5-10% — Moderate growth
• 0-5% — Slow growth
• Negative — Declining ❌
1. Trailing EPS (TTM):
• Based on: Last 4 quarters
• Use: Most common, backward-looking
• Formula: Sum of last 4 quarters' EPS
2. Forward EPS:
• Based on: Analyst estimates for next 12 months
• Use: Forward-looking, growth expectations
• Formula: Estimated future EPS
3. Reported EPS:
• Based on: GAAP accounting standards
• Use: Official numbers (can include one-time items)
4. Adjusted EPS:
• Based on: Excluding one-time items
• Use: Core business performance (more useful)
PE Ratio = Stock Price / EPS
Example:
• TCS price: ₹3,800
• TCS EPS: ₹123
• PE Ratio: ₹3,800 / ₹123 = 30.9x
Meaning:
• EPS will increase → PE will fall (assuming price same) → Stock will become cheaper
• EPS will fall → PE will increase → Stock will become expensive
This connection is very important — EPS growth directly affects the PE ratio.
Fair Value Calculation:
• Fair Price = EPS × Industry Average PE
• Example:
• Company EPS: ₹50
• Industry PE: 20
• Fair Price: ₹50 × 20 = ₹1,000
• If the stock is at ₹800 → Undervalued (20% discount)
• If the stock is at ₹1,200 → Overvalued (20% premium)
PEG Ratio (EPS + PE Combined):
• PEG = PE Ratio / EPS Growth Rate
• Example:
• PE = 25, EPS Growth = 20%
• PEG = 25 / 20 = 1.25
• PEG < 1 = Undervalued
• PEG 1-2 = Fair value
• PEG > 2 = Overvalued
If EPS is increasing but revenue is flat → Cost cutting has hampered profit. This is not sustainable long-term.
The company sold the property → EPS was affected once. Will fall back next year. Look at Adjusted EPS.
Company buys back its shares → Shares reduce → EPS automatically increases even if profit is the same.
If the company is in loss then EPS will be negative. Avoid all these stocks unless there is a turnaround story.
Keep these points in mind:
• 📌 EPS QUICK REFERENCE
• FORMULA:
• 📊 EPS = Net Profit / Total Shares Outstanding
• 📊 PEG = PE / EPS Growth Rate
• 📊 Fair Price = EPS × Industry PE
• EPS TREND:
• 📊 Growing → Company profitable, bullish
• 📊 Declining → Profitability weakening, bearish
• 📊 Stable → Consistent, neutral
• 📊 Negative → Loss-making, caution
• EPS GROWTH:
• 📊 > 20% = High growth 🔥
• 📊 10-20% = Good growth
• 📊 5-10% = Moderate
• 📊 < 5% = Slow
• 📊 Negative = Declining ❌
• VALUATION:
• 📊 Fair Price = EPS × Industry PE
• 📊 PEG < 1 = Undervalued
• 📊 PEG 1-2 = Fair
• 📊 PEG > 2 = Overvalued
• RED FLAGS:
• ❌ EPS growth without revenue growth
• ❌ One-time gains boosting EPS
• ❌ Buybacks artificially boosting EPS
• ❌ Negative EPS without turnaround story
Keep these four points in mind:
• What Is the PE Ratio?
• What Is Market Cap?
• What Is a Dividend?
• Fundamental Analysis Guide
The Retail Trader — educational market analysis. Not investment advice.
This article is for educational purposes only. It is not a buy or sell recommendation, a claim of guaranteed returns, or advisory guidance. Exchanges, SEBI and RBI change rules, rates and procedures from time to time, so verify every figure with your broker or an official source.