How Do You Calculate Profit Earned per Share

Earnings Per Share (EPS) Calculator

Earnings Per Share (EPS) $0.00

function calculateEPS() { var income = parseFloat(document.getElementById('netIncome').value); var dividends = parseFloat(document.getElementById('prefDividends').value) || 0; var shares = parseFloat(document.getElementById('sharesOutstanding').value); var resultElement = document.getElementById('epsValue'); if (isNaN(income) || isNaN(shares) || shares <= 0) { resultElement.innerHTML = "Invalid Input"; resultElement.style.color = "#d32f2f"; return; } var eps = (income – dividends) / shares; resultElement.style.color = "#1a237e"; resultElement.innerHTML = "$" + eps.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); }

How to Calculate Profit Earned Per Share

Profit earned per share, commonly known as Earnings Per Share (EPS), is one of the most critical metrics used by investors to determine a company's profitability. It indicates how much of a company's profit is allocated to each individual share of common stock.

The EPS Formula

EPS = (Net Income – Preferred Dividends) / Weighted Average Shares Outstanding

Key Components Explained

• Net Income: This is the total profit of the company after all expenses, taxes, and interest have been paid. You can find this on the bottom line of the Income Statement.
• Preferred Dividends: These are payments promised to preferred shareholders. Since EPS measures profit available to common shareholders, these dividends must be subtracted from the net income.
• Weighted Average Shares Outstanding: This represents the total number of common shares held by investors during a specific reporting period, adjusted for any shares issued or bought back during that time.

Practical Example

Suppose a company "TechFlow Corp" reports the following for the fiscal year:

Net Income	$5,000,000
Preferred Dividends	$500,000
Shares Outstanding	2,000,000

Step 1: Subtract dividends from income: $5,000,000 – $500,000 = $4,500,000.

Step 2: Divide by shares: $4,500,000 / 2,000,000 = $2.25 per share.

Why EPS Matters

Investors track EPS because it tells them how much "earning power" each share possesses. A consistently rising EPS often leads to a higher stock price over time. Furthermore, EPS is the primary building block for the Price-to-Earnings (P/E) ratio, which helps determine if a stock is overvalued or undervalued relative to its peers.