Earnings per share (EPS) is calculated by dividing a company's net income by the average number of outstanding shares during a specific period of time. The formula to calculate EPS is:
EPS = Net Income / Average Number of Shares
Here's a step-by-step process to calculate EPS:
For example, if a company has a net income of $10 million and an average of 10 million outstanding shares, the EPS would be $1 ($10 million / 10 million shares). This means that each share of the company's stock has earned $1 of profit.
It's important to note that EPS is frequently reported on a per-share basis for each quarter or on an annual basis.
EPS can be used by investors and analysts as a key metric to assess a company's profitability and profitability growth over time. It helps in comparing the earnings of different companies or industries on a per-share basis.
It is also worth noting that EPS can be calculated using different variations, including basic EPS and diluted EPS. Basic EPS is calculated by dividing the net income by the total number of outstanding shares, while diluted EPS takes into account potential dilution from stock options, convertible securities, or other sources.
It is recommended to refer to a company's financial statements or consult with a financial professional for the most accurate and up-to-date information on EPS calculation.