EPS Calculator
From net income, preferred dividends and weighted average shares, compute earnings per share (EPS).
Input Data
Results
At a glance:Earnings Per Share (EPS) = (net income − preferred dividends) ÷ weighted average ordinary shares. It is the profit attributable to each ordinary share, a core profitability and valuation metric (P/E denominator). Preferred dividends are subtracted first (preferred paid before ordinary); weighted average shares reflect issuance/repurchase during the period. Basic EPS ignores potential dilutive securities; diluted EPS assumes they convert.
Formula
EPS = (net income − preferred dividends) ÷ weighted average ordinary shares.
$$$\\dfrac{5{,}000{,}000 - 500{,}000}{2{,}000{,}000}=2.25$$$How to Use
- Enter the after-tax net income.
- Enter preferred dividends (0 if none).
- Enter the weighted average ordinary shares, then view EPS.
EPS at different net income, preferred dividends and share counts
| Net income (HK$) | Preferred div (HK$) | Weighted shares | EPS (HK$) |
|---|---|---|---|
| 5,000,000 | 500,000 | 2,000,000 | 2.25 |
| 8,000,000 | 0 | 4,000,000 | 2.00 |
| 12,000,000 | 1,000,000 | 5,000,000 | 2.20 |
Case Studies
Case 1: EPS with preferred dividends
Company: net income HK$5,000,000, preferred dividends HK$500,000, weighted ordinary shares 2,000,000.
EPS = (5,000,000 − 500,000) ÷ 2,000,000 = 4,500,000 ÷ 2,000,000 = HK$2.25.
Interpretation: after preferred dividends (paid first), HK$4.5M belongs to ordinary shareholders; ÷ 2M shares = HK$2.25 each. At price HK$27, P/E = 27 ÷ 2.25 = 12×. Higher EPS means more per-share profit — the basis for valuation.
Case 2: How share issuance dilutes EPS
A: net profit HK$8M, no preferred, 4M shares → EPS = 8,000,000 ÷ 4,000,000 = HK$2.00. B: net profit HK$12M (higher), preferred HK$1M, 5M shares → EPS = (12,000,000 − 1,000,000) ÷ 5,000,000 = HK$2.20.
B's total profit (12M) far exceeds A's (8M), but because B has more shares and pays preferred dividends, their EPS are close (2.20 vs 2.00).
Interpretation: total profit alone does not mean more per share. Issuing shares to inflate total profit dilutes EPS; per-share profit may not rise. So EPS is closer to the shareholder view than total profit. Caveat: this is basic EPS; with convertibles/warrants/options, also compute diluted EPS, usually lower and more conservative.
FAQ
Why subtract preferred dividends first?
Because EPS measures profit per ordinary share, and preferred shareholders have a prior claim on earnings. Net income must first satisfy preferred dividends; the remainder belongs to ordinary shareholders. So to get ordinary EPS, deduct preferred dividends from net income. If there are no preferred shares, enter 0.
Why use a weighted average share count?
Because a company may issue new shares (fundraising, options exercised) or buy back shares during the year, so shares outstanding are not fixed. Using only the year-end count would not match most of the period. The weighted average weights each share count by the months it was outstanding, better reflecting the average shares in circulation and aligning EPS with the year's earnings.
What is the difference between basic and diluted EPS?
Basic EPS (this calculator) uses only current ordinary shares. Diluted EPS assumes all securities that could become ordinary shares (convertible bonds, convertible preferred, warrants, employee options) are exercised or converted, increasing the share count, so diluted EPS is usually lower. Diluted EPS is more conservative, showing worst-case per-share earnings, and listed companies must disclose both — consider diluted too when investing.
How is EPS related to P/E, and does higher EPS mean a better stock?
P/E = share price ÷ EPS, so EPS is the denominator of the P/E ratio, which shows 'how much the market pays per dollar of earnings'. Example: price HK$27, EPS HK$2.25 → P/E = 12×. Rising EPS (better earnings) lowers P/E if price holds (cheaper valuation); if the market is bullish, price may rise with EPS, keeping P/E. Does higher EPS mean a better stock? Not necessarily: (1) EPS absolute values are not comparable across companies — different share counts, capital structures and accounting policies mean firm A's EPS HK$5 vs B's HK$1 does not prove A is better; use P/E and peers. (2) Earnings quality matters — EPS can be inflated by one-off gains (asset sales, revaluation); prefer recurring EPS and multi-year trends. (3) High EPS is not necessarily cheap — if the price already reflects it (high P/E), the return may be limited; a low P/E may signal expected profit decline. So EPS is a foundation, but judge with P/E, growth, quality and industry outlook, not EPS alone.
Why must listed companies disclose both basic and diluted EPS?
Basic EPS uses only the current weighted average ordinary shares; diluted EPS assumes all potential ordinary shares (convertible bonds, convertible preferred, warrants, employee options) are converted, increasing the count so EPS is diluted lower. Example: basic EPS HK$2.25, but if many outstanding options are exercised, diluted EPS may fall to HK$2.05. Both views matter: basic reflects current reality; diluted reveals the worst case — how much EPS would be diluted if all potential shares convert. For companies with many options or convertibles (e.g. tech/growth), the gap can be large; ignoring dilution overstates EPS. Accounting standards require both, so investors can fully assess. If diluted EPS is clearly below basic, the dilution pressure is larger — value using the conservative diluted EPS.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.