EPS Equation:
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Earnings Per Share (EPS) is a financial metric that indicates how much profit a company makes for each share of its stock. It's calculated by dividing net income minus dividends by the number of outstanding shares.
The calculator uses the EPS equation:
Where:
Explanation: The equation shows the portion of a company's profit allocated to each outstanding share of common stock.
Details: EPS is a key indicator of a company's profitability and is widely used by investors to evaluate stock performance and compare companies.
Tips: Enter net income and dividends in USD, and shares as a whole number. All values must be valid (net income ≥ 0, dividends ≥ 0, shares > 0).
Q1: What's the difference between basic and diluted EPS?
A: Basic EPS uses current shares outstanding, while diluted EPS accounts for potential shares from options, warrants, etc.
Q2: What is a good EPS value?
A: Higher EPS is generally better, but it varies by industry. Compare to competitors and historical performance.
Q3: Why subtract dividends in the calculation?
A: Only for preferred dividends. Common stock dividends are already deducted from net income.
Q4: How often is EPS calculated?
A: Typically quarterly and annually, reported in financial statements.
Q5: What are limitations of EPS?
A: Doesn't account for capital structure and can be manipulated through share buybacks.