Basic EPS and diluted EPS are two measures used to show how much profit a company earns for each share of its common stock. The main difference is that basic EPS uses the current number of outstanding common shares, while diluted EPS considers the possibility that additional shares could be created from securities such as stock options, convertible bonds, or convertible preferred shares.

Basic EPS is generally calculated by dividing a company’s net income available to common shareholders by the weighted average number of common shares outstanding during a period. It provides a straightforward view of earnings attributable to existing common shareholders.

Diluted EPS goes a step further by assuming that potentially dilutive securities are converted into common shares when applicable. This increases the number of shares used in the calculation and can reduce the earnings attributed to each share. For example, if a company has many employee stock options that could become shares, diluted EPS may be lower than basic EPS.

The difference is important because diluted EPS can provide investors with a more conservative view of potential earnings per share. It highlights how existing shareholders’ ownership of future earnings could be affected if additional shares are issued.

Investors often examine both figures when analyzing a company's financial performance. A small difference between basic and diluted EPS may indicate limited potential dilution, while a larger difference can suggest that convertible securities, options, or other instruments could significantly increase the share count.

Therefore, basic EPS reflects current share ownership, whereas diluted EPS considers potential future dilution. Looking at both can provide a broader understanding of a company's earnings on a per-share basis.