EPS — earnings per share — is net profit divided by the number of shares. It turns the company's profit into your slice of it. The catch is the bottom half of that sum: the share count isn't fixed. Companies issue new shares to raise money, to pay for acquisitions and to pay their staff, and every new share takes a slice of the same profit.
That's dilution: the same profit, more shares, less for each one. Diluted EPS shows it in advance by counting shares that could exist soon, such as staff options and convertible bonds, as if they already did. When the two figures sit far apart, a lot of future shares are waiting. So watch EPS growth, not just profit growth: a company can grow profit by 10% and still shrink your slice if it grows its share count by 15%.
Issue another 100m shares and the same profit comes to 16.7p each.
Educational content only. It is not personal financial advice.