How to Calculate Eps

Earnings Per Share (EPS) Calculator

Your Earnings Per Share (EPS) is:

function calculateEPS() { var netIncome = parseFloat(document.getElementById('netIncome').value); var preferredDividends = parseFloat(document.getElementById('preferredDividends').value); var shares = parseFloat(document.getElementById('sharesOutstanding').value); var resultDiv = document.getElementById('epsResult'); var resultValue = document.getElementById('epsValue'); if (isNaN(netIncome) || isNaN(shares) || shares <= 0) { alert("Please enter valid numbers. Shares outstanding must be greater than zero."); return; } if (isNaN(preferredDividends)) { preferredDividends = 0; } var eps = (netIncome – preferredDividends) / shares; resultValue.innerHTML = "$" + eps.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); resultDiv.style.display = "block"; }

How to Calculate Earnings Per Share (EPS)

Earnings Per Share (EPS) is one of the most important financial metrics used by investors and analysts to gauge a company's profitability. It represents the portion of a company's profit allocated to each individual share of common stock.

The EPS Formula

The standard formula for calculating basic EPS is:

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

Components Explained

• Net Income: The total profit of the company after all expenses, taxes, and interest have been paid. This is usually found at the bottom of the income statement.
• Preferred Dividends: These are dividends promised to preferred shareholders. Since EPS measures profit available to common shareholders, these dividends must be subtracted from net income.
• Weighted Average Common Shares: This is the number of shares outstanding during the reporting period, adjusted for any share issuances or buybacks that occurred during that time.

Practical Example

Suppose "TechCorp" reports a net income of $1,000,000. They have paid out $100,000 in preferred dividends. Throughout the year, they had an average of 500,000 common shares outstanding.

Step 1: Subtract dividends from income ($1,000,000 – $100,000 = $900,000).
Step 2: Divide by shares ($900,000 / 500,000).
Result: TechCorp has an EPS of $1.80.

Why EPS Matters

A higher EPS generally indicates that a company is more profitable and has more value to distribute to its shareholders. It is also the "E" in the P/E (Price-to-Earnings) ratio, which is used to determine if a stock is overvalued or undervalued relative to its peers.