If you’ve ever looked at a company’s stock and wondered, “Is it making money?” — that’s where Earnings Per Share (EPS) comes in!
EPS is a key financial metric that tells you how much profit a company makes for each share of its stock. It’s simple to calculate and super useful for investors.
Let’s walk through it step by step!
Table of Contents
EPS Calculator
Enter the Net Income, Dividend Payments to preferred shareholders and the average number of regular shares held by investors. The tool will calculate Earnings per share.
What is EPS?
EPS stands for Earnings Per Share. It shows how much of a company’s net income (profit) is assigned to each outstanding share of stock.
In plain English:
It tells you how much money the company is making per share that investors own.
EPS Formula
Here’s the basic formula:
EPS = (Net Income - Preferred Dividends) ÷ Average Outstanding SharesWhere:
- Net Income = Total profit after taxes and expenses
- Preferred Dividends = Payments to preferred shareholders (if any)
- Average Outstanding Shares = The average number of regular shares held by investors
Example
Let’s say:
- Net Income = $5,000,000
- Preferred Dividends = $500,000
- Outstanding Shares = 1,000,000
Step-by-step:
EPS = (5,000,000 - 500,000) ÷ 1,000,000
EPS = 4.5
So, the Earnings Per Share is $4.50. That means the company earned $4.50 for each share of stock.
Why EPS Matters
EPS is one of the most important indicators of a company’s profitability. Investors use it to:
- Compare companies in the same industry
- Track a company’s growth over time
- Help determine stock value
A higher EPS often means the company is more profitable, but always compare it with others in the same sector for better context.
Types of EPS
| Type of EPS | What it Means |
|---|---|
| Basic EPS | Standard calculation based on current shares |
| Diluted EPS | Includes potential shares from stock options |
| Trailing EPS | Based on past 12 months of earnings |
| Forward EPS | Based on projected future earnings |
Quick Recap
EPS = (Net Income - Preferred Dividends) ÷ Average Outstanding SharesIt’s a simple way to check how profitable a company is per share.
Related Posts