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Trading and Investment Terms

Earnings Per Share – EPS

Earnings per share (EPS) is determined as an company's benefit divided by the outstanding shares of its common security. The outcome fills in as a sign of a company's growth and profitability.


EPS basically shows the amount of money a company makes for each unit of its security.


It is normal for a company to declare its EPS that is balanced for extraordinary things and any possible share dilution. A company is considered more profitable if it has a higher EPS.


The EPS value are computed as the net income which is achieved by subtracting Depreciation Costs from Gross Income (revenue) , in other words EPS is calculated using profits. Profits are then divided by the available shares.


A progressively refined estimation balances the numerator and denominator for shares that could be made through options, convertible debt, or warrants.


Earnings per Share = Net Income − Preferred Dividends/End-of-Period Common Shares Outstanding


In order to calculate a company's EPS, we must use the company’s balance sheet and its income statements. From these, we can get period-end amount of common shares, dividends paid by the company to its investors, and the profits of the company.


The calculation will be more precise if we use a weighted average number of common shares instead of reporting term as the number of shares can change over the period of time.

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