Earnings Per Share, abbreviated to EPS, indicates how much earnings per share a company has available. It is an indication of the maximum dividend that can be paid per share.
EPS = Net income / Number of shares issued *
This does not include preference shares as this is a financial expense and has therefore already been charged to the profit.
Example: Suppose there is a net profit of € 100 and of this € 50 is reserved in the profit distribution (Profit reserve; also called General or Other reserve) and the remainder is paid out as a dividend. The company has issued 5 ordinary shares. Each share will therefore give the right to a 50/5 = € 10 dividend after the profit distribution. The maximum dividend payable in this example is 100/5 = € 20 per share. The EPS of this company is, therefore, € 20.
An estimated share price can be calculated using EPS. However, this requires the investors’ return requirement. Suppose there is a return requirement of 10% then the estimated price of this company is 20/10% = € 200
(source: Wikipedia)