1. What is Earnings Per Share (EPS)?

EPS is a financial metric that indicates how much profit a company makes for each share of its common stock. It's one of the most important indicators of a company's profitability and is widely used by investors to evaluate stock performance.

2. How Is EPS Calculated?

The basic EPS formula is:

Where:

• Net Income — The company's total earnings after all expenses and taxes
• Preferred Dividends — Dividends paid to preferred shareholders (which must be subtracted because EPS applies only to common stock)
• Average Common Shares — The weighted average number of common shares outstanding during the period

3. Importance of EPS

Details: EPS is a key metric used by investors to:

• Compare profitability among companies
• Track a company's performance over time
• Calculate the price-to-earnings (P/E) ratio
• Make investment decisions

4. Using the Calculator

Tips:

• Enter net income and preferred dividends in dollars
• Enter average common shares as a whole number (no commas)
• All values must be positive numbers
• Average shares should be the weighted average for the period

5. Frequently Asked Questions (FAQ)

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

Q2: What is considered a good EPS?
A: There's no universal "good" EPS - it depends on the industry and company growth stage. Generally, higher is better, and consistent growth is positive.

Q3: Why subtract preferred dividends?
A: EPS measures earnings available to common shareholders. Preferred dividends represent earnings claimed by preferred shareholders before common shareholders.

Q4: How often is EPS calculated?
A: Companies typically report EPS quarterly and annually in their financial statements.

Q5: Can EPS be negative?
A: Yes, if a company has a net loss (negative net income), EPS will be negative, indicating the company is losing money per share.