Calculate the portion of profit allocated to each outstanding share
Profit Data
Share Count
Earnings Per Share (EPS)
$0.00
What is Earnings Per Share (EPS)?
EPS is a corporate accounting figure that indicates how much money a company makes for each share of its stock. It is a key driver of share prices. A higher EPS indicates more value because investors will pay more for a company's shares if they think the company has higher profits relative to its share price. The formula is: $$EPS = \frac{Net\ Income - Preferred\ Dividends}{Weighted\ Average\ Common\ Shares}$$
- The Bottom Line: While "Net Income" tells you total profit, EPS tells you how that profit is distributed. A company could have rising profit but falling EPS if they are issuing too many new shares (dilution).
- P/E Ratio Connection: EPS is the "E" in the Price-to-Earnings (P/E) ratio, which is the most common way to value a company.
- Growth Indicator: Consistent growth in EPS year-over-year is often the best indicator of a healthy, well-managed company.
What is the difference between Basic and Diluted EPS? +
Basic EPS only counts currently outstanding shares. Diluted EPS assumes that all "convertible" items (like stock options or convertible bonds) are turned into shares, giving a "worst-case" view of profit distribution.
Why subtract Preferred Dividends? +
Preferred shareholders get paid before common shareholders. Since EPS measures the profit available to *common* stockholders, we must subtract the money already promised to preferred holders.
Is a higher EPS always better? +
Usually, yes. However, a company can artificially "boost" EPS by using cash to buy back its own shares, which reduces the total number of shares without actually increasing the profit.
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