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Earnings per share calculation
Discover the earnings per share value based on the net income, preferred dividends, and outstanding shares provided above.
Earnings Per Share | $9.00 |
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How to calculate earnings per share?
To calculate Earnings Per Share (EPS), you need to:
- Determine the net income: This is the company's total profit after taxes and other deductions.
- Subtract preferred dividends: If the company has preferred stock, deduct the dividends paid to preferred shareholders from the net income.
- Calculate the average outstanding shares: Find the average number of common shares outstanding during the period.
- Divide the two values: Divide the adjusted net income by the average outstanding shares.
The formula for calculating earnings per share is:
For example, if a company has a net income of $10 million, paid $1 million in preferred dividends, and has 1 million average outstanding shares, the calculation would be:
In our example, the EPS would be $9 per share.
It’s worth noting that earnings per share is sometimes referred to as profit earned per share. They are essentially the same thing.
If you want to determine whether a stock is overpriced or undervalued, consider using our Price-to-Earnings (P/E) Ratio Calculator.