Earnings Per Share (EPS) Calculator
This calculator determines a company's profitability on a per-share basis by calculating Earnings Per Share (EPS).
Enter the company's Net Income, Preferred Dividends (if any), and Weighted Average Shares Outstanding to calculate EPS.
Enter Financial Data
Understanding Earnings Per Share (EPS)
What is EPS?
Earnings Per Share (EPS) is a key financial metric that shows how much profit a company generates for each outstanding share of its common stock. It's widely used by investors to assess a company's profitability and compare it with other companies.
EPS Formula
The basic EPS formula is:
EPS = (Net Income - Preferred Dividends) / Weighted Average Shares Outstanding
Where:
- Net Income: The company's total profit after all expenses and taxes
- Preferred Dividends: Dividends that must be paid to preferred shareholders before common shareholders
- Weighted Average Shares Outstanding: The average number of common shares during the period, accounting for any stock splits or changes
Why EPS Matters
EPS is important because:
- It shows how profitable a company is on a per-share basis
- It allows comparison between companies of different sizes
- It's used to calculate the Price-to-Earnings (P/E) ratio
- Investors often track EPS growth over time
Types of EPS
There are several variations of EPS:
- Basic EPS: The standard calculation shown above
- Diluted EPS: Accounts for all potential shares that could be created through options, warrants, etc.
- Adjusted EPS: Excludes one-time items to show ongoing profitability
- Forward EPS: Estimates of future EPS
EPS Calculation Examples
Click on an example to see the step-by-step calculation:
Example 1: Basic EPS Calculation
Scenario: Company A reports $1,000,000 net income, $100,000 in preferred dividends, and has 200,000 weighted average shares outstanding.
1. Formula: EPS = (Net Income - Preferred Dividends) / Weighted Average Shares Outstanding
2. Calculation: EPS = ($1,000,000 - $100,000) / 200,000
3. Calculation: EPS = $900,000 / 200,000
4. Result: EPS = $4.50
Conclusion: Company A earned $4.50 for each common share.
Example 2: No Preferred Dividends
Scenario: Company B reports $500,000 net income, no preferred dividends, and has 100,000 weighted average shares outstanding.
1. Formula: EPS = (Net Income - Preferred Dividends) / Weighted Average Shares Outstanding
2. Calculation: EPS = ($500,000 - $0) / 100,000
3. Result: EPS = $5.00
Conclusion: Company B earned $5.00 for each common share.
Example 3: Large Share Count
Scenario: Company C reports $10,000,000 net income, $500,000 in preferred dividends, and has 5,000,000 weighted average shares outstanding.
1. Calculation: EPS = ($10,000,000 - $500,000) / 5,000,000
2. Result: EPS = $9,500,000 / 5,000,000 = $1.90
Conclusion: Despite large net income, the high share count results in modest EPS of $1.90.
Example 4: Negative Earnings
Scenario: Company D reports -$200,000 net income, $50,000 in preferred dividends, and has 100,000 weighted average shares outstanding.
1. Calculation: EPS = (-$200,000 - $50,000) / 100,000
2. Result: EPS = -$250,000 / 100,000 = -$2.50
Conclusion: The negative EPS indicates a loss of $2.50 per share.
Example 5: Comparing Two Companies
Scenario: Compare Company E ($2M net income, 1M shares) with Company F ($5M net income, 10M shares).
Company E: EPS = ($2,000,000 - $0) / 1,000,000 = $2.00
Company F: EPS = ($5,000,000 - $0) / 10,000,000 = $0.50
Conclusion: Despite lower total earnings, Company E is more profitable per share ($2.00 vs $0.50).
Example 6: Stock Split Adjustment
Scenario: Company G had a 2-for-1 stock split during the year. Pre-split shares: 500,000. Post-split shares: 1,000,000. Net income: $1,500,000.
1. Weighted Average Shares: (6 months × 500,000) + (6 months × 1,000,000) = 750,000
2. EPS Calculation: $1,500,000 / 750,000 = $2.00
Conclusion: The stock split is accounted for in the weighted average shares calculation.
Example 7: High Preferred Dividends
Scenario: Company H reports $800,000 net income, $300,000 in preferred dividends, and has 200,000 shares outstanding.
1. Calculation: EPS = ($800,000 - $300,000) / 200,000
2. Result: EPS = $500,000 / 200,000 = $2.50
Conclusion: The substantial preferred dividends significantly reduce EPS available to common shareholders.
Example 8: Quarterly EPS Calculation
Scenario: Company I reports Q1 net income of $250,000, no preferred dividends, with 125,000 shares outstanding all quarter.
1. Calculation: EPS = $250,000 / 125,000 = $2.00
Conclusion: Quarterly EPS is $2.00. Annual EPS would depend on full-year results.
Example 9: EPS Growth Calculation
Scenario: Company J had EPS of $1.50 last year and $2.25 this year.
1. Growth Calculation: ($2.25 - $1.50) / $1.50 = 50% growth
Conclusion: The company achieved 50% EPS growth year-over-year.
Example 10: Diluted EPS vs Basic EPS
Scenario: Company K has $1,000,000 net income, no preferred dividends, 200,000 basic shares, and potential dilution from options for 50,000 additional shares.
Basic EPS: $1,000,000 / 200,000 = $5.00
Diluted EPS: $1,000,000 / 250,000 = $4.00
Conclusion: The diluted EPS ($4.00) is lower than basic EPS ($5.00) due to potential share dilution.
Frequently Asked Questions about EPS
1. What is the basic EPS formula?
The basic EPS formula is: EPS = (Net Income - Preferred Dividends) / Weighted Average Shares Outstanding.
2. Why subtract preferred dividends?
Preferred dividends are subtracted because EPS measures earnings available to common shareholders. Preferred dividends must be paid before common shareholders receive anything.
3. What's the difference between basic and diluted EPS?
Basic EPS uses current shares outstanding. Diluted EPS includes potential shares from convertible securities, options, and warrants, showing "worst-case" EPS if all were converted.
4. How do stock splits affect EPS?
Stock splits increase shares outstanding proportionally while decreasing EPS proportionally. The weighted average shares calculation accounts for splits during the period.
5. Can EPS be negative?
Yes, negative EPS occurs when a company has net losses. It means the company lost money per share during the period.
6. What is a good EPS?
There's no universal "good" EPS. It depends on the industry, company size, and growth stage. Investors typically look for consistent EPS growth over time.
7. How often is EPS reported?
Public companies report EPS quarterly (Q1-Q4) and annually. Some companies also provide EPS guidance between official reports.
8. Why use weighted average shares?
Weighted average accounts for changes in shares outstanding during the period (from stock issuance, buybacks, or splits), giving a more accurate per-share measure.
9. What's the difference between EPS and adjusted EPS?
Adjusted EPS excludes one-time items (like restructuring costs) to show ongoing profitability. It's non-GAAP but often used by companies to show "core" earnings.
10. How is EPS used in valuation?
EPS is used to calculate the Price-to-Earnings (P/E) ratio (Price per Share / EPS). Lower P/E may indicate better value, but must be considered with growth prospects.
