How Do I Calculate Eps

Earnings Per Share (EPS) Calculator

Enter 0 if no preferred dividends are paid.

Basic Earnings Per Share (EPS)

function calculateEPS() { var netIncome = parseFloat(document.getElementById('netIncome').value); var prefDividends = parseFloat(document.getElementById('prefDividends').value); var avgShares = parseFloat(document.getElementById('avgShares').value); var resultDiv = document.getElementById('epsResultDisplay'); var valueDiv = document.getElementById('finalEPSValue'); var descDiv = document.getElementById('epsDescription'); if (isNaN(netIncome) || isNaN(prefDividends) || isNaN(avgShares) || avgShares <= 0) { alert("Please enter valid positive numbers. Shares outstanding must be greater than zero."); return; } var earningsAvailable = netIncome – prefDividends; var eps = earningsAvailable / avgShares; valueDiv.innerText = "$" + eps.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); descDiv.innerText = "For every share of common stock, the company generated " + valueDiv.innerText + " in profit."; resultDiv.style.display = 'block'; }

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How to Calculate Earnings Per Share (EPS)

Earnings Per Share (EPS) is one of the most critical metrics used by investors to gauge a company's profitability. It indicates how much profit a company makes for each share of its stock. A higher EPS generally suggests greater value because investors will pay more for a company's shares if they believe the company has higher profits relative to its share price.

The EPS Formula

The standard formula for calculating Basic Earnings Per Share is:

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

Breaking Down the Components

• Net Income: This is the company's total profit 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 dividends promised to preferred shareholders. Since EPS measures profit available to common shareholders, these must be subtracted from net income.
• Weighted Average Common Shares: This represents the number of common shares outstanding during the reporting period, adjusted for any share issuances or buybacks that occurred mid-year.

Why EPS Matters

EPS is the "E" in the famous P/E (Price-to-Earnings) ratio. It allows investors to compare the performance of different companies, regardless of their size. For example, a company earning $1 million with 1 million shares ($1.00 EPS) is performing differently than a company earning $1 million with 10 million shares ($0.10 EPS).

Example Calculation

Suppose "Tech Corp" has a net income of $1,200,000 for the year. They paid out $200,000 in dividends to preferred shareholders. Throughout the year, they had an average of 500,000 common shares in the hands of investors.

1. Subtract dividends: $1,200,000 – $200,000 = $1,000,000 (Earnings available to common shareholders).
2. Divide by shares: $1,000,000 / 500,000 = $2.00.
3. Tech Corp's EPS is $2.00.

Basic vs. Diluted EPS

When analyzing a stock, you might see "Diluted EPS." This is a more conservative measure that assumes all convertible securities (like stock options, warrants, or convertible bonds) have been exercised. Diluted EPS is almost always lower than Basic EPS and provides a "worst-case scenario" for share dilution.