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 for profitability analysis.

2. How is EPS Calculated?

The basic EPS formula is:

Where:

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

Explanation: The formula shows the portion of a company's profit allocated to each outstanding share of common stock.

3. Importance of EPS

Details: EPS is a critical metric used by investors to assess a company's profitability and to compare companies. 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 dollars, and average shares outstanding as a whole number. All values must be positive (shares must be > 0).

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 all possible shares that could be created through options, warrants, etc.

Q2: What is a good EPS value?
A: There's no universal "good" EPS - it depends on the company's industry, growth stage, and other factors. Compare to historical EPS and competitors.

Q3: Why subtract preferred dividends?
A: Preferred dividends are paid before common shareholders, so they're subtracted to show earnings available to common shareholders.

Q4: How often is EPS calculated?
A: Typically quarterly and annually, matching financial reporting periods.

Q5: Can EPS be negative?
A: Yes, if a company has a net loss, EPS will be negative indicating losses per share.