EPS Calculator

What Is Earnings Per Share (EPS)?

Earnings Per Share (EPS) is a fundamental financial metric that shows how much profit a company generates for each outstanding share of common stock. It is one of the most widely used indicators of corporate profitability and is a key input in valuation models like the Price-to-Earnings (P/E) ratio.

EPS Formula

Basic EPS is calculated by dividing net income (after preferred dividends) by the weighted average number of common shares outstanding:

$$\text{EPS} = \frac{\text{Net Income} - \text{Preferred Dividends}}{\text{Weighted Average Common Shares Outstanding}}$$

Basic vs. Diluted EPS

• Basic EPS: Uses only the actual shares outstanding. Simpler but less conservative.
• Diluted EPS: Includes the effect of convertible securities, stock options, and warrants that could increase the share count. Diluted EPS is always equal to or lower than basic EPS and is considered the more conservative measure.

Why EPS Matters to Investors

EPS growth over time signals improving profitability. Investors use EPS to compare companies within the same industry and to calculate the P/E ratio, which places a price tag on each dollar of earnings. Companies with consistently growing EPS typically command higher valuations in the market.

For related calculations, see our EPS Growth Calculator and Dividend Payout Ratio Calculator.