The profit per share ratio is a popular indicator of a company's profitability, which should be thoroughly analysed by investors before making a decision to buy shares of a given company. The earnings per share ratio is calculated by subtracting preferred dividends from net income and dividing by the weighted average common shares outstanding.
The EPS ratio is not difficult to calculate if you have the following information about the company:
The formula is as follows:
(Net income after tax - Preferred stock dividends) ÷
Average number of common shares outstanding
Let’s demonstrate this with an example. Imagine a company that has a net income of USD 1,000,000 and must pay out USD 200,000 in dividends. Their weighted average number of common shares outstanding during the period was 400,000 shares. Their EPS ratio would be:
(1,000,000 (net income) - 200,000 (preferred stock dividends)) ÷
400,000 (average number of common shares outstanding)
=USD 2.00 per share
At XTB, we know that detailed analysis of the most-interesting stocks can take some time, which is why we've created a market calendar that allows you to filter stocks based on various parameters, such as EPS, dividends, BETA, and more.
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