Calculate earnings per share (EPS) by entering net income, preferred dividends, and weighted average shares outstanding. EPS is a key metric for evaluating company profitability.
Earnings per share, or EPS, is a measure of corporate profitability. It tells you how much money a company makes per share. EPS is one of the most important ways to measure the profitability of a corporation. EPS is equal to the company’s profit divided by the number of outstanding common shares. This includes dilutive convertible preferred shares, convertible common shares, and outstanding common shares.
Basic EPS Formula:
EPS = (Net Income - Preferred Dividends) ÷ Weighted Average Shares Outstanding
Net Income: $1,000,000
Preferred Dividends: $50,000
Shares Outstanding: 100,000
EPS = ($1,000,000 - $50,000) ÷ 100,000 = $9.50
The most straightforward EPS calculation, using the current number of shares outstanding.
Formula: (Net Income - Preferred Dividends) ÷ Shares Outstanding
Includes the impact of convertible securities, options, and warrants.
Formula: (Net Income – Preferred Dividends) ÷ (Shares Outstanding + Dilutive Securities)
Calculated using the last 12 months of earnings data.
Uses actual reported earnings from the previous four quarters.
An estimated EPS for a future period, often based on analyst forecasts.
Used for valuation and growth analysis.
| EPS Range | Category | Interpretation | Investment Consideration |
|---|---|---|---|
| $10+ | Excellent | Very high profitability per share | Strong buy candidate, high value |
| $5 - $10 | Good | Solid profitability per share | Good investment potential |
| $1 - $5 | Average | Moderate profitability per share | Consider other factors |
| $0.01 - $1 | Low | Low profitability per share | High risk, research thoroughly |
| Negative | Loss | Company is losing money | Very high risk, avoid unless turnaround expected |
EPS is the denominator in the P/E ratio. EPS and P/E ratio together show if a stock is overvalued or undervalued.
P/E Ratio = Stock Price ÷ EPS
EPS shows how profitable a company is, while revenue per share shows how efficient a company is at sales. It is good to analyze both metrics when making an investment decision.
Revenue per Share = Total Revenue ÷ Shares Outstanding
EPS reflects the earnings potential of a company, while dividend per share tells you how much cash the company returned to shareholders.
Payout Ratio = Dividend per Share ÷ EPS
EPS measures earnings, while book value per share indicates the net asset value of a company per share.
Price-to-Book = Stock Price ÷ Book Value per Share
EPS growth is a critical indicator of a company's financial health and future prospects. Consistent EPS growth often correlates with strong stock performance.
| Industry | Average EPS | High EPS Range | Characteristics |
|---|---|---|---|
| Technology | $3-8 | $10-25 | High growth, scalable business models |
| Healthcare | $2-6 | $8-15 | Stable demand, regulatory protection |
| Financial Services | $4-10 | $12-20 | Leverage, interest rate sensitive |
| Consumer Goods | $2-5 | $6-12 | Stable cash flows, brand value |
| Energy | $3-7 | $8-15 | Commodity price dependent |
Focus on companies with rapidly growing EPS, typically in emerging industries or markets.
Seek companies with stable EPS and low P/E ratios, often in mature industries.
Target companies with stable EPS that support consistent dividend payments.
Focus on companies with high-quality earnings and sustainable EPS growth.
