EPS is a carefully scrutinized metric that is often used as a barometer to gauge a company's profitability per unit of shareholder ownership. As such, earnings per share are a key driver of share prices. It is also used as the denominator in the frequently cited P/E ratio. EPS can be calculated via two different methods: basic and fully diluted. Fully diluted EPS -- which factors in
the potentially dilutive effects of warrants, stock options and securities convertible into common stock -- is generally viewed as a more accurate measure and is more commonly cited( Basely 2006, P.20) EPS can be subdivided further according to the time period involved. Profitability can be assessed by prior (trailing) earnings, recent (current) earnings or projected future (forward) earnings. Though earning per share is widely considered to be the most popular method of quantifying a firm's profitability, it's important to remember that earnings themselves can often be susceptible to manipulation, accounting changes and restatements. For that reason, free cash flow is seen by some to be a more reliable indicator than EPS.