EPS Calculator (Earnings Per Share)
Analyze stock profitability and investment value
Earnings Per Share (EPS)
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P/E Ratio
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Understanding the EPS Calculation
Earnings Per Share (EPS) is a critical indicator used by investors to determine a company's profitability on a per-share basis. Higher EPS values generally indicate higher profitability and more potential value for shareholders.
The EPS Formula
EPS = (Net Income – Preferred Dividends) / Average Outstanding Shares
Why EPS Matters
- Profitability Metric: It shows how much profit a company makes for every share of its stock.
- Valuation Tool: EPS is the primary component used to calculate the Price-to-Earnings (P/E) ratio.
- Growth Comparison: By tracking EPS over several quarters, investors can see if a company is growing its core earnings.
Example Calculation
If Company A has a Net Income of $1,000,000, pays $100,000 in Preferred Dividends, and has 500,000 Weighted Average Shares:
($1,000,000 – $100,000) / 500,000 = $1.80 EPS