Earnings Per Share (EPS) Calculator
Profit allocated to each outstanding share.
Formula first
Overview
Earnings Per Share (EPS) is a fundamental financial metric that represents the portion of a company's net income assigned to each outstanding share of common stock. It provides a standardized way for investors to evaluate profitability across companies of different sizes or share structures.
Symbols
Variables
NP = Net Profit, S = Number of Shares, EPS = EPS
Apply it well
When To Use
When to use: Analysts use EPS during financial statement reviews to track a company's earnings trajectory over multiple fiscal periods. It is also an essential component in valuation models, such as the Price-to-Earnings ratio, used to determine if a stock is fairly priced.
Why it matters: EPS directly influences stock prices as it signals the potential for dividend payouts and future business expansion. A consistently growing EPS reflects strong operational performance and management's ability to generate value for shareholders.
Avoid these traps
Common Mistakes
- Using revenue instead of net profit.
- Convert units and scales before substituting, especially when the inputs mix £, shares, £/share.
- Interpret the answer with its unit and context; a percentage, rate, ratio, and physical quantity do not mean the same thing.
One free problem
Practice Problem
A technology firm reports a net profit of 500,000 for the fiscal year. If there are 100,000 outstanding shares, what is the Earnings Per Share (EPS)?
Solve for: eps
Hint: Divide the total net profit by the number of shares.
The full worked solution stays in the interactive walkthrough.
References
Sources
- Britannica: Earnings per share
- Wikipedia: Earnings per share
- Corporate Finance by Ross, Westerfield, and Jaffe
- Kieso, Weygandt, Warfield, Financial Accounting (17th ed., 2020)
- Ross, Westerfield, Jaffe, Corporate Finance (12th ed., 2019)
- GCSE Finance — Investing & Stocks