Earning per Share Calculation

Earnings Per Share (EPS) Calculator

Enter values and click "Calculate EPS"

Please enter valid positive numbers for all fields. Common Shares Outstanding must be greater than zero.

Net Income must be greater than or equal to Preferred Dividends for a meaningful EPS calculation.

Earnings Per Share (EPS): $" + eps.toFixed(2) + "

Understanding Earnings Per Share (EPS)

Earnings Per Share (EPS) is a crucial financial metric that indicates the portion of a company's profit allocated to each outstanding share of common stock. It serves as a key indicator of a company's profitability and is widely used by investors and analysts to assess a company's financial health and value.

What is EPS?

In simple terms, EPS tells you how much money a company makes for each share of its stock. A higher EPS generally indicates greater value because the company is generating more profit per share, which can lead to higher dividends or an increase in the stock's price.

How is EPS Calculated?

The basic formula for Earnings Per Share is:

EPS = (Net Income – Preferred Dividends) / Number of Common Shares Outstanding

• Net Income: This is the company's total profit after all expenses, taxes, and interest have been deducted. It's often referred to as "profit after tax."
• Preferred Dividends: These are dividends paid to preferred shareholders. Since EPS is calculated for common shareholders, preferred dividends must be subtracted from net income to determine the profit available to common shareholders.
• Number of Common Shares Outstanding: This is the total number of common shares currently held by all shareholders, including institutional investors and insiders.

Why is EPS Important?

EPS is a vital metric for several reasons:

• Profitability Indicator: It directly reflects a company's ability to generate profit for its common shareholders.
• Valuation Tool: Investors often use EPS in conjunction with a company's stock price to calculate the Price-to-Earnings (P/E) ratio, a common valuation multiple.
• Performance Comparison: It allows for easy comparison of profitability between different companies within the same industry or a company's performance over different periods.
• Dividend Potential: A higher EPS can suggest a company has more funds available to distribute as dividends to common shareholders.

Example Calculation:

Let's consider a hypothetical company, "Growth Corp," with the following financial data:

• Net Income: $1,000,000
• Preferred Dividends: $100,000
• Common Shares Outstanding: 500,000

Using the formula:

EPS = ($1,000,000 – $100,000) / 500,000
EPS = $900,000 / 500,000
EPS = $1.80

This means that for every common share of Growth Corp, the company earned $1.80 in profit.

Using the EPS Calculator:

Our Earnings Per Share Calculator simplifies this process. Simply input the following values:

1. Net Income ($): Enter the company's total profit after tax.
2. Preferred Dividends ($): Input any dividends paid to preferred shareholders. If none, enter 0.
3. Common Shares Outstanding: Enter the total number of common shares currently in circulation.

Click "Calculate EPS," and the tool will instantly provide you with the Earnings Per Share, helping you quickly assess a company's profitability on a per-share basis.