Why earning per share is important for stock investors?

EPS is the portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability.

EPS is calculated as

(Net Income - Dividend given to preferred share holders)/Average No. of outstanding shares

The EPS is helpful in comparing one company to another, assuming they are in the same industry, but it doesn't tell you whether it's a good stock to buy or what the market thinks of it.

But, ideally speaking, the EPS is a good indicator of the company's performance and in most cases where the company has a solid EPS over a considerable period of time, we can consider investing in that company.