Earnings per share (EPS)

Alternative names: eps

What is EPS

Earnings per share (EPS) is the total amount of earnings attributed to each individual share for over a period of one year. It’s a way of measuring the profits made by the company for each share outstanding.

How to calculate EPS (formula)

The formula for calculating EPS is using the net income of the company and subtract the preferred dividend paid:

Earnings per Share (EPS) = (Net Income − Preferred Dividends) / Shares Outstanding

Since dividends payable to preferred shareholders are not available to common shareholders they are deducted from the calculation of EPS.

Basic EPS vs Diluted EPS

EPS can be two different types: Basic EPS and Diluted EPS. The main difference is that diluted EPS account for diluting securities while the basic EPS don’t. Diluted securities are any financial instrument that can be converted or can increase the number of common shares outstanding for the company. Diluted EPS is important because it accounts for convertible securities like: convertible bonds, proffered shares, stock options etc.

Stocks with high PE ratios

Name Price to earnings (P/E) Marketcap Industry
TCBS Texas Community Bancshares Inc 98.54 $39.89M Banks - Regional
AMCX AMC Networks Inc 98 $511.61M Broadcasting
WING Wingstop Inc 97.93 $5.9B Restaurants
ALCC AltC Acquisition Corp 97.18 $683.63M Shell Companies
QRVO Qorvo Inc 96.39 $9.61B Semiconductors
BRK.B Berkshire Hathaway Inc 95.94 $716.02B Insurance - Diversified
SVC Service Properties Trust 95.67 $1.42B REIT - Hotel & Motel

Why is EPS important

Earnings growth and future earnings potential are one of the most important factors for investors. A lot of investors use EPS and EPS growth as a proxy of estimating how well a company is doing. A company that is able to grow its EPS year over year is considerate as good investment that is commonly reflected in the rise in the share price.

Related terms