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What is an EPS estimate? It's the same thing as an earnings estimate, but with one added arithmetic step, stick with me we're gonna make this fun.

Imagine you're ordering a huge pizza pie for all your friends. You have like three huge pies of melting, beautiful red and yellow pizza pies. The total number of slices is 24. Congrats. You clearly have a lot of friends, but nobody's walking around saying, Hey, we're ordering 24 slices of pizza. No, everyone's walking around saying, hey, we're all getting two slices. That's because you have 12 friends. 24 divided by 12 is 2, total expected slices, 24 slices per friend? 2. Earnings and earnings per share or EPS works the same way. Let's say company X is expected to generate $1 billion in earnings from the following year, so total revenues minus total expenses for that year are expected to net the company $1 billion. Well, you don't always hear analysts and money managers running around saying, this company's going to do $1 billion in earnings next year.

Sometimes you hear that, but you hear people saying, we think this company does $3.33 for the next year. I'm sorry, what? This huge company is going to make three bucks. No, it's going to make $1 billion. Earnings per share will be $3.33. That's because we're saying there are 300 million shares out there on the market, so that $1 billion in earnings is shared by all investors holding the shares. $1 billion in earnings divided by 300 million shares is $3.33 per share. If you hold 10 shares, you're expecting $33.33 of those earnings to be attributable to you. Now you can talk the talk.


What in the world can that mean? Well, In our 60 Seconds (or so) special series, I'm here to break it down for you.

Let's get to it, shall we?

It means earnings-per-share. 

Don't be intimidated. It's just an earnings projection, but with one added arithmetic step. 

Earnings are total revenues for a time period less total expenses for that period. 

But each shareholder holds a certain number of shares, and it attributed a certain number of earnings dollars based on the number of shares they hold. 

Well, we just divide earnings by total shares outstanding and we get earnings per share. 

See the significance, the meaning, and why you, as an investor should care, in the above video.

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