What Is Earnings Per Share (EPS)?

• Earnings per share (EPS) can be defined as net profit per share.
• They indicate the amount of net profit per share.

What is EPS?

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.

Earnings per share formula

The EPS ratio is not difficult to calculate if you have the following information about the company:

• Net income after tax
• Preferred stock dividends
• Average number of common shares outstanding

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.