Earnings Per Share Calculator

EPS Formula:

\[ EPS = \frac{\text{Net Income} - \text{Preferred Dividends}}{\text{Average Shares Outstanding}} \]

Earnings Per Share (EPS):

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1. What is Earnings Per Share (EPS)?

EPS is a company's net profit divided by the number of common shares it has outstanding. It indicates how much money a company makes for each share of its stock and is a key metric used by investors to assess a company's profitability.

2. How Does the Calculator Work?

The calculator uses the basic EPS formula:

\[ EPS = \frac{\text{Net Income} - \text{Preferred Dividends}}{\text{Average Shares Outstanding}} \]

Where:

\( \text{Net Income} \) — Company's total earnings after expenses and taxes
\( \text{Preferred Dividends} \) — Dividends paid to preferred shareholders
\( \text{Average Shares Outstanding} \) — Weighted average of shares over reporting period

Explanation: The formula subtracts preferred dividends first because EPS only applies to common stock. The result shows earnings available to common shareholders per share.

3. Importance of EPS Calculation

Details: EPS is a fundamental measure of corporate profitability used in price-to-earnings (P/E) ratios and other valuation metrics. Higher EPS generally indicates greater value as investors will pay more for higher earnings.

4. Using the Calculator

Tips: Enter net income and preferred dividends in currency units (dollars, euros, etc.). Average shares should be the weighted average outstanding during the period. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between basic and diluted EPS?
A: Basic EPS uses current shares outstanding, while diluted EPS accounts for potential shares from options, warrants, and convertible securities.

Q2: What is considered a good EPS?
A: There's no absolute standard - compare to industry peers and historical performance. Consistent growth is generally positive.

Q3: Can EPS be negative?
A: Yes, if net income (after preferred dividends) is negative, indicating the company is losing money.

Q4: Why exclude preferred dividends?
A: EPS measures earnings available to common shareholders. Preferred dividends are paid before common shareholders get anything.

Q5: How often is EPS calculated?
A: Companies report EPS quarterly and annually. Trailing twelve months (TTM) EPS is commonly used for analysis.