Earnings Per Share Formula (EPS) (2024)

FAQs

Earnings Per Share Formula (EPS)? ›

To calculate earnings per share, take a company's net income and subtract that from preferred dividends. Then divide that amount by the average number of outstanding common shares.

The basic EPS is calculated by dividing a company's net income by the weighted average of common shares outstanding.

Earnings per share value is calculated as net income (also known as profits or earnings) divided by available shares.

There are a couple of ways to calculate a company's EPS. The first is to subtract preferred dividends from net income and divide them by the end-of-period shares outstanding. The other way is to subtract preferred dividends from net income and divide by the weighted average of shares outstanding.

Importance of Earnings Per Share

It helps compare the performance of promising companies to help pick the most suitable investment option. 2. EPS can also be used to compare the financial standing of a company over the years. Companies that have a steady EPS increase can be a reliable investment option.

Earnings per share: This measure is calculated by taking the net income earned by the corporate and dividing it by the number of outstanding shares issued. Price / Earnings ratio: P/E ratio is measured by dividing the share price by the earnings per share.

After collecting the necessary data, input the net income, preferred dividends and number of common shares outstanding into three adjacent cells, say B3 through B5. In cell B6, input the formula "=B3-B4" to subtract preferred dividends from net income. In cell B7, input the formula "=B6/B5" to render the EPS ratio.

It is calculated by : EPS= Net profit after tax and preference dividend / Number of equity shares. Was this answer helpful?

What is EPS in simple terms? ›

Earnings per share (EPS) is a measure of a company's profitability, calculated by dividing quarterly or annual income (minus dividends) by the number of outstanding stock shares. The higher a company's EPS, the greater the profit and value perceived by investors.

There's no definition of a “good” or “bad” EPS value. But all other things being equal, the higher a company's EPS is, the better. The opposite is true for a company's price-to-earnings (P/E) ratio. In most cases, the lower a company's P/E ratio is, the better.

Earnings per Share Formula Definition: A company's Earnings per Share (EPS) equals its Net Income / Weighted Average Shares Outstanding and tells you how much in profit it's earning for each “unit” of ownership in the company.

Basic EPS = (Net income - preferred dividends) ÷ weighted average of common shares outstanding during the period. Net income can be further broken down into 'continuing operations' P&L and 'total P&L' and preferred dividends should be removed as this income is not available to common stockholders.

EPS equals the difference between net income and preferred dividends, divided by the average number of outstanding common shares. EPS is sometimes known as the bottom line of a firm's worth. The earnings per share figure can help investors gain an idea of a company's financial performance.

Basic earnings per share should be calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

After collecting the necessary data, input the net income, preferred dividends and number of common shares outstanding into three adjacent cells, say B3 through B5. In cell B6, input the formula "=B3-B4" to subtract preferred dividends from net income. In cell B7, input the formula "=B6/B5" to render the EPS ratio.