Earnings per Share (EPS) Calculator

The earnings per share (EPS) calculator is a handy tool that allows you to estimate their real value in a couple of simple clicks. As its name suggests, it is designed with the goal of calculating earnings per share. Best of all, this amazing tool can calculate it in a jiffy!

Nevertheless, you should know how it’s calculated by hand. That’s why we will provide the EPS formula, which can come in handy when estimating earnings per share and making an investment decision. In essence, you need to divide the outstanding shares of the company’s common stock by its profit. The result you get will indicate the profitability of the company.

What Is Earnings Per Share (EPS)?

As stated above, EPS is a measure of the company’s profitability per share. It is also known as “net income per share.” So, when talking about earnings per share, we think of the earnings that a company earns for each share of its common stock.

Before making an investment decision, you can either compare the figures of Earnings Per Share (EPS) for one or several companies. If you want to compare these values for more than one company, make sure they are in the same industry. The earnings per share can help you pick the one that is most profitable. However, you need to calculate EPS first.

It is calculated by dividing a company’s net income (available to common shareholders) by its weighted average shares outstanding (the total number of outstanding shares). EPS gives an indication of how much an investment in a company will earn in return for each dollar invested, and it is used as one way to compare companies within an industry or sector.

The number of shares outstanding can change over time, and this can affect a company’s EPS. For example, if a company issues more shares, then there will be fewer shares for each shareholder to own. This means that each shareholder now owns a smaller piece of the pie, i.e., fewer earnings. As a result, this will decrease EPS for all shareholders.

EPS Key Features

• EPS is a metric that’s meant to help estimate corporate value.
• This variable plays an important role in determining whether or not it’s profitable to invest in a certain stock.
• It tells us how much money (profit) an enterprise or firm earns per stock share.
• The higher EPS values mean that the company is profitable, and vice versa.
• EPS arrives in a few different forms, including discontinued operations, extraordinary items, as well as on a diluted basis.
• Only the common stock is taken into account.

EPS Formula: How to Calculate Earnings Per Share?

Now that you know what EPS stands for and what it indicates, it is time to see how it’s calculated. We have already mentioned the calculation and EPS calculator. It uses the following formula:

EPS = Total Earnings / Outstanding Shares

Example:

Let’s say the total earnings are $10,000. If we assume that the outstanding shares are $1,000, the earnings per share would be 10 (EPS = 10,000 / 1,000 = 10).

There’s another way to calculate earnings per share. It’s also possible to calculate it as net income (earnings or profits) without dividends divided by outstanding common shares. If you choose this approach, use the formula below:

Where:

• Net income represents the profit or total earnings after all expenses have been accounted for. It is calculated by subtracting all the expenses from the total revenue and then subtracting any interest or taxes paid from that number. A company’s net income can be calculated on an annual, quarterly, monthly, or daily basis depending on what type of financial statement it wants to provide to its customers and investors.
• Dividends on preferred stock refer to stocks that are issued by corporations to provide investors with a higher yield than that of common stocks. Preferred stocks are often called “fixed-income” because they offer fixed dividends, typically paid quarterly or annually. In the event of liquidation, preferred stockholders are paid off before common stockholders. However, this is not always the case; it depends on the company’s charter and how the company is managed.
• Average outstanding common shares are expressed as the number of shares that shareholders currently hold. It is worth noting that this value tends to fluctuate as time goes on. If the additional shares are issued by the company, this number will increase. On the other hand, it will drop when the shares are bought back.

Example:

• Net income: $3,100,000
• Dividends on preferred stock: $200,000
• Average outstanding common shares: $333,500

EPS = (3,100,000 -200,000) / 333,500

EPS = 2,900,000 / 333,500

EPS = $8.70

In our example, the EPS value is equal to $8.70. Let’s say the company buys back $50,000 shares. In that case, the earnings per share would be:

EPS = 2,900,000 / (333,500 – 50,000)

EPS = 2,900,000 / 283,500

EPS = $10.23

This means the EPS value would increase to $10.23 in case the company buys back 50K shares. Use your own values and calculate the earnings per share with the help of our calculator. It can save you a lot of time and effort.

How Is EPS Applied?

Lastly, you should know how the earnings per share are used. It comes down to the following two applications:

• The EPS is often utilized in assessing the P/E (price-to-earnings) ratio or in company valuation that is based on the discounted cash flow.
• It is also used for discovering good investment possibilities in the stock market. Investors seek companies whose earnings per share growth are high.

Many employ this metric when they want to determine a company’s profitability. Earnings per share allow investors to evaluate the value of a stock by dividing a firm’s share price by the EPS value. This indicator is used when picking stocks. That being said, if investing or stock trading is something you’re interested in, take it into account when determining earnings value. It’s worth using!