EPS Calculator
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Earnings per share is the profit available to common shareholders divided by the average number of shares: EPS = (net income − preferred dividends) ÷ weighted average shares. $5M of net income, $0.5M of preferred dividends and 2M shares give EPS = $2.25.
| Basic EPS | $2.25 |
| Diluted EPS (with 100,000 extra shares) | $2.14 |
| P/E ratio | 20 |
| Earnings yield | 5% |
Show steps
- Earnings available to common shareholders = net income − preferred dividends = $5,000,000 − $500,000 = $4,500,000
- Basic EPS = $4,500,000 ÷ 2,000,000 shares = $2.25
- Diluted EPS adds potential shares from options and convertibles: $4,500,000 ÷ 2,100,000 = $2.14
- P/E = share price ÷ EPS = $45.00 ÷ $2.25 = 20
How to use the EPS calculator
- Enter net income, preferred dividends and the weighted average number of common shares for the period.
- Optionally add dilutive shares for diluted EPS and a share price for the P/E ratio.
- Press Calculate.
Formulas
- Basic EPS = (net income − preferred dividends) ÷ weighted average common shares
- Diluted EPS = (net income − preferred dividends) ÷ (weighted shares + dilutive shares)
- P/E ratio = share price ÷ EPS
- Earnings yield = EPS ÷ share price
Weighted average shares
If the share count changes during the year, weight each count by the fraction of the year it was outstanding. 1,000,000 shares for 6 months and 1,200,000 for 6 months average 1,100,000.
Reading EPS
EPS is reported on the income statement, and growth in EPS over time is one of the most watched measures of profitability. It does not show cash flow or how many shares a company bought back, so compare it with other figures.
Earnings per share practice quiz: 10 questions
Test yourself with 10 multiple-choice questions. Choose an answer and press Submit to see if you are right and why. Your score appears at the end.
Quiz complete
Frequently asked questions
How do you calculate EPS?
Subtract preferred dividends from net income and divide by the weighted average number of common shares outstanding.
What is diluted EPS?
EPS calculated as if options, warrants and convertible securities had been turned into shares. It is the more conservative figure.
What is a good EPS?
There is no single number; investors look at EPS growth over time and at EPS relative to the share price (the P/E ratio).
Why use weighted average shares?
Because the number of shares can change during the year; weighting matches the shares to the period in which the income was earned.
Can EPS be negative?
Yes, when a company has a net loss.
Sources
- Corporate Finance Institute: Earnings per Share (EPS)
- OpenStax Principles of Accounting, Volume 1: Financial Accounting
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