Earnings Per Share Calculator

1. What is Earnings Per Share Calculator?

Definition: This calculator computes EPS, the profit per outstanding common share.

Purpose: Helps investors assess a company's profitability per share, a key metric in stock valuation.

2. How Does the Calculator Work?

The calculator uses the formula:

EPS Formula:

$ EPS = \frac{NI - DP}{AS} $

Where:

$ NI $: Net Income (dollars)
$ DP $: Dividends on Preferred Stock (dollars)
$ AS $: Average Outstanding Common Shares (shares)

Steps:

Enter net income, dividends on preferred stock, and average shares.
Subtract preferred stock dividends from net income.
Divide by average shares to get EPS.
Display with 2 decimal places.

3. Importance of EPS

Calculating EPS is crucial for:

Investment Analysis: Indicates per-share profitability, influencing stock prices.
Company Performance: Reflects earnings efficiency after preferred dividends.
Comparison: Allows comparison across companies with different share structures.

4. Using the Calculator

Example 1: NI = $100,000, DP = $5,000, AS = 10,000:

Net Income ($ NI $): $100,000
Dividends on Preferred Stock ($ DP $): $5,000
Average Shares ($ AS $): 10,000
EPS: $ \frac{100,000 - 5,000}{10,000} = 9.50 $ dollars/share
Result: $ 9.50 $ dollars/share

Example 2: NI = $50,000, DP = $0, AS = 5,000:

Net Income ($ NI $): $50,000
Dividends on Preferred Stock ($ DP $): $0
Average Shares ($ AS $): 5,000
EPS: $ \frac{50,000 - 0}{5,000} = 10.00 $ dollars/share
Result: $ 10.00 $ dollars/share

Example 3: NI = $200,000, DP = $20,000, AS = 15,000:

Net Income ($ NI $): $200,000
Dividends on Preferred Stock ($ DP $): $20,000
Average Shares ($ AS $): 15,000
EPS: $ \frac{200,000 - 20,000}{15,000} = 12.00 $ dollars/share
Result: $ 12.00 $ dollars/share

5. Frequently Asked Questions (FAQ)

Q: What is EPS?
A: EPS measures profit per common share, excluding preferred stock dividends.

Q: Why subtract preferred dividends?
A: Preferred shareholders have priority, so their dividends are deducted before calculating EPS for common shares.

Q: How is average shares determined?
A: It’s the average number of common shares outstanding over a period, adjusted for issuances or buybacks.