Earnings per Share Calculator

You can use this Earnings per Share (EPS) Calculator to calculate the earnings per share based on the total net income, preferred dividends paid and the number of outstanding common shares.

Follow the next steps to determine the earnings per share:

  1. First, choose the currency you wish to use (optional)
  2. Next, enter the total net income
  3. Next, input the amount of preferred stock dividends
  4. Finally, enter the weighted average number of common shares outstanding and then click the "Calculate EPS" button.

What does Earnings Per Share mean?

Investors want to know the income they generate from a share. Earnings per share denotes the money you would earn for owning each share of common stock. This figure is used to assess the viability of stock prices. A higher earning per share indicates that a company has better profitability.

If you are calculating EPS or Earnings Per Share, then we recommend you use a weighted ratio as the quantity of shares in existence can change over time. EPS is split into two types:

  1. Basic earnings per share
  2. Diluted earnings per share

If no preferred stock is outstanding, basic EPS is calculated as follows:

Basic EPS = Net Income / Weighted Average Number of Common Shares Outstanding

If preferred stock is outstanding, the EPS is calculated as follows:

Basic EPS = (Net Income - Preferred Dividends) / Weighted Average Number of Common Shares Outstanding

Earnings per Share (EPS) Calculator

Calculating the Weighted Average Shares Outstanding

The number of common shares can change during a given period. In this case, you need to use the weighted average shares outstanding. This can be calculated using the length of time the shares are outstanding. This is best shown by an example, where 25,000 shares are outstanding and issued, in addition, 5,000 shares on July 1, the weighted average shares would be calculated as:

  • 25,000 shares * 12/12 = 25,000 outstanding entire year
  • + 5,000 shares * 6/12 = 2,500 outstanding last 6 months
  • Weighted average common shares: 25,000 + 2,500 = 27,500
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What is Diluted Earnings Per Share?

This can be worked out using the same formula. But, you need to know that the additional shares that can become outstanding will also be included as common stock. This can be for a number of reasons, including being part of the compensation plans of the company or as convertible debt/common stock.

Earnings Per Share (EPS) Formula

The EPS calculator uses the following basic formula to calculate earnings per share:

EPS = (I - D) / S

Where:

EPS  is the earnings per share,

I  is the net income of a company,

D  is the total amount of preferred stock dividends,

S  is the weighted average number of common shares outstanding

Example: Suppose we have the following information about a company:

  • Net Income (I) = $500,000
  • Preferred Dividends (D) = $100,000
  • Weighted average number of common shares outstanding (S) = 10,000

In this example, the EPS would be calculated as follows:

EPS = (I - D) / S

EPS = ($500,000 - $100,000) / 10,000

EPS = $400,000 / 10,000 = $40, the EPS value for this company is $40

Conclusion

Many investors look for a regular source of income. The earnings per share ratio will help that investor understand the capacity a company has for higher dividends in the future. It is a tool that is used frequently by investors, but is by no means the only measure of a company's financial future. You should take into account all of the financial information available to make an investment decision.

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