Earnings Per Share Calculator

EPS Formula:

\[ EPS = \frac{(Net\ Income - Preferred\ Dividends)}{Weighted\ Average\ Shares} \]

Earnings Per Share (EPS):

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1. What is Earnings Per Share (EPS)?

Earnings Per Share (EPS) is a key financial metric that represents the portion of a company's profit allocated to each outstanding share of common stock. It is widely used by investors to evaluate a company's profitability and financial performance.

2. How Does the Calculator Work?

The calculator uses the Basic EPS formula:

\[ EPS = \frac{(Net\ Income - Preferred\ Dividends)}{Weighted\ Average\ Shares} \]

Where:

\( Net\ Income \) — Total company profit after all expenses and taxes (USD)
\( Preferred\ Dividends \) — Dividends paid to preferred shareholders (USD)
\( Weighted\ Average\ Shares \) — Average number of common shares outstanding during the period

Explanation: The formula calculates how much profit each common share would receive if all profits were distributed to shareholders.

3. Importance of EPS Calculation

Details: EPS is a critical indicator of company profitability and is used by investors to compare companies, assess stock valuation through P/E ratios, and make investment decisions.

4. Using the Calculator

Tips: Enter net income and preferred dividends in USD, weighted average shares as whole numbers. All values must be valid (positive numbers, shares > 0).

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between Basic EPS and Diluted EPS?
A: Basic EPS uses actual shares outstanding, while Diluted EPS includes potential shares from options, warrants, and convertible securities.

Q2: What is considered a good EPS value?
A: Higher EPS is generally better, but it should be evaluated relative to the company's historical performance, industry peers, and stock price.

Q3: Why subtract preferred dividends?
A: Preferred dividends are subtracted because they represent earnings that must be paid to preferred shareholders before common shareholders can receive any distribution.

Q4: How often is EPS calculated?
A: EPS is typically calculated quarterly and annually as part of financial reporting requirements.

Q5: Can EPS be negative?
A: Yes, if a company reports a net loss, EPS will be negative, indicating the company lost money during the period.