Earnings Per Share is calculated as Net Profit After Tax divided by the weighted average number of equity shares outstanding during the period. It is the most commonly cited per-share profitability metric and feeds directly into the price-to-earnings (P/E) ratio used to compare valuations.
Diluted EPS adjusts for potential dilution from convertible instruments, employee stock options, and warrants that could convert into additional equity shares. For IPO research, diluted EPS is the more conservative figure because it assumes all such instruments are exercised. Basic EPS uses only outstanding shares without dilution adjustments.
EPS in isolation is not meaningful — it must be read alongside the share price (to compute P/E), peer-company EPS (to compare profitability), and EPS growth trajectory (to assess earnings momentum). Companies that show rapid EPS growth pre-IPO but then plateau or decline post-listing are a common pattern that pre-IPO research should screen for.