Earnings per share (EPS) is a financial ratio used to evaluate the profitability of a company. The EPS measures a company's net income as a percentage of outstanding common stock. Investors commonly use the EPS calculation to compare earnings from different companies in the same industry and make investment decisions. You can manually calculate the earnings per share with some basic information about a company's financials.
1. Determine the net income for a company. You can find this information on the company's income statement. Net income is the income after taxes. For example, assume a company has net income of $50,000.
2. Determine the number of common shares outstanding. You can find this information on the company's statement of owner's equity. For example, assume a company has 25,000 shares outstanding.
3. Divide the company's net income by the number of shares outstanding. Continuing the same example, $50,000 / 25,000 = $2. This figure represents the EPS per share of common stock for the company.
- Stanford University: EPS (Earnings Per Share)
- "Principles of Finance"; Scott Besley and Eugene Brigham; 2008
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