Earnings Per Share (EPS) 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 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 Calculator Work?

The calculator uses the basic EPS formula:

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

Where:

Net Income — Company's total earnings after all expenses and taxes
Preferred Dividends — Dividends required to be paid to preferred shareholders
Average Shares Outstanding — Weighted average of shares during the reporting period

Explanation: The formula subtracts preferred dividends first because EPS applies only to common stock. The result shows how much profit each common share would receive if all profits were distributed.

3. Importance of EPS Calculation

Details: EPS is a fundamental measure of corporate profitability used in the price-to-earnings (P/E) valuation ratio. Higher EPS generally indicates greater value as investors will pay more for a company with higher profits per share.

4. Using the Calculator

Tips: Enter net income and preferred dividends in dollars (without commas). Average shares should be entered as whole numbers. 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 all potential shares that could be created through options, warrants, or convertible securities.

Q2: What is considered a good EPS?
A: There's no absolute standard - it varies by industry. Compare a company's EPS to its historical EPS and competitors' EPS.

Q3: Can EPS be negative?
A: Yes, if a company has a net loss, EPS will be negative, indicating the company is losing money per share.

Q4: Why use weighted average shares?
A: Companies may issue or buy back shares during a period, so the weighted average gives a more accurate picture.

Q5: How often is EPS reported?
A: Public companies report EPS quarterly in earnings releases and annually in 10-K filings.