What this calculator does
Earnings per share restates a company's total profit as an amount earned per individual share, which is what makes it possible to compare profitability across companies of very different sizes, or to track a single company's profitability over time as its share count changes. Learning how to calculate earnings per share starts with one simple division: net income divided by the number of shares outstanding.
Most published EPS figures first subtract preferred dividends from net income, since that income belongs to preferred shareholders and was never available to common shareholders in the first place. The share count used is a weighted average over the period, not a single snapshot, because share counts often change partway through a reporting period as new shares are issued or bought back.
The formula
Subtract any preferred dividends from net income to get the income available to common shareholders, then divide by the weighted average number of shares outstanding over the period. Leave preferred dividends at zero if the company has none, which reduces the calculation to plain net income divided by shares outstanding.
| Term | Meaning |
|---|---|
| EPS | Earnings per share: (net income − preferred dividends) ÷ weighted average shares outstanding. |
| Net income | Total profit for the period, before any distribution to preferred or common shareholders. |
| Preferred dividends | Dividends owed to preferred shareholders, which reduce the income left over for common shareholders. |
| Weighted average shares outstanding | The number of common shares outstanding, averaged over the reporting period to account for any shares issued or repurchased partway through. |
The inputs explained
| Field | What to enter |
|---|---|
| Net income ($) | Total net income for the period being measured, before any dividend payments. |
| Preferred dividends (if any) ($) | Dividends paid or owed to preferred shareholders for the same period. Enter zero if there is no preferred stock. |
| Weighted average shares outstanding | The weighted average number of common shares outstanding over the period, not simply the count on one single date. |
When to use it
Working out how to calculate earnings per share from a financial statement
Company filings usually report net income and share counts separately; this calculator combines them the same way a published EPS figure is calculated, including the preferred dividend adjustment most companies apply.
Feeding EPS into a valuation ratio
EPS is the denominator behind the P/E ratio and several other valuation multiples, so working it out directly is the first step before comparing a share price against earnings.
Seeing the effect of a share buyback or issuance
Because EPS divides by the share count, changing the number of shares outstanding, even with net income held flat, directly moves EPS up or down. Recalculating EPS at a different share count isolates that effect.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
How EPS changes as net income grows at a fixed share count
A fixed 2,000,000 shares, against a range of net income levels.
| Net income | Earnings per share (EPS) | Net income available to common shareholders |
|---|---|---|
| $1,000,000 | $0.50 | $1,000,000.00 |
| $2,500,000 | $1.25 | $2,500,000.00 |
| $5,000,000 | $2.50 | $5,000,000.00 |
| $10,000,000 | $5.00 | $10,000,000.00 |
| $20,000,000 | $10.00 | $20,000,000.00 |
| $40,000,000 | $20.00 | $40,000,000.00 |
How EPS changes as the share count grows at a fixed net income
A fixed $5,000,000 in net income, across a range of share counts.
| Weighted average shares outstanding | Earnings per share (EPS) | Net income available to common shareholders |
|---|---|---|
| 1,000,000 | $5.00 | $5,000,000.00 |
| 2,000,000 | $2.50 | $5,000,000.00 |
| 4,000,000 | $1.25 | $5,000,000.00 |
| 5,000,000 | $1.00 | $5,000,000.00 |
| 10,000,000 | $0.50 | $5,000,000.00 |
| 20,000,000 | $0.25 | $5,000,000.00 |
Questions
Why subtract preferred dividends before dividing by shares?
Preferred dividends are paid to preferred shareholders, not common shareholders, so that portion of net income was never available to be earned per common share in the first place. Leaving it in would overstate EPS for common shareholders.
Why use a weighted average share count instead of the count at the end of the period?
If a company issues or buys back a large number of shares partway through the year, using only the year-end count would misrepresent the number of shares that actually shared in the year's earnings. A weighted average reflects how long each share was actually outstanding.
What is the difference between basic and diluted EPS?
Basic EPS, calculated here, uses only shares currently outstanding. Diluted EPS additionally assumes that convertible securities, options and warrants are converted into shares, which usually produces a lower, more conservative figure.
What is EPS used for once it is calculated?
EPS on its own is a per-share profitability figure; it becomes the input to valuation ratios such as the P/E ratio, and can be compared against the dividend paid per share using the dividend yield and payout ratio calculator.
Once EPS is known, use the P/E ratio calculator to see how the share price compares against it, or the dividend yield and payout ratio calculator to see how much of it is being paid out as dividends.