1. What is Earnings Per Share (EPS)?

Earnings Per Share (EPS) is a key financial metric that measures the amount of a company's profit allocated to each outstanding share of common stock. It indicates a company's profitability and is widely used by investors to evaluate stock performance.

2. How Does the EPS Calculator Work?

The calculator uses the basic EPS formula:

Where:

• Net Income — Total company profits after all expenses
• Preferred Dividends — Dividends paid to preferred shareholders
• Average Shares Outstanding — Weighted average of shares during the period

Explanation: The formula shows how much profit is available to common shareholders per share after accounting for preferred dividends.

3. Importance of EPS Calculation

Details: EPS is a critical metric for investors as it directly impacts stock valuation. Higher EPS typically indicates better profitability and often leads to higher stock prices.

4. Using the Calculator

Tips: Enter net income and preferred dividends in dollars, and average shares outstanding as a whole number. 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: "Good" EPS varies by industry. Compare to competitors and look for consistent growth over time.

Q3: Can EPS be negative?
A: Yes, if net income is less than preferred dividends or if the company has a net loss.

Q4: Why subtract preferred dividends?
A: Preferred dividends are paid before common shareholders, so they're not available to common stockholders.

Q5: How often is EPS calculated?
A: Companies report EPS quarterly and annually in their financial statements.