How is eps calculated on a stock quote

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Stock Advisor launched in February of It is the figure most commonly reported in the financial media, and it is also the simplest definition of EPS. Specifically, it incorporates shares that are not currently outstanding but could become outstanding if stock options and other convertible securities were to be exercised.

Typically, this consists of adding or removing components of net income that are deemed to be non-recurring. When looking at EPS to make an investment or trading decision, be aware of some possible drawbacks. For instance, a company can game its EPS by buying back stock, reducing the number of shares outstanding, and inflating the EPS number given the same level of earnings.

Changes to accounting policy for reporting earnings can also change EPS. EPS also does not take into account the price of the share, so it has little to say about whether a company's stock is over- or undervalued.

After collecting the necessary data, input the net income, preferred dividends, and number of common shares outstanding into three adjacent cells, say B3 through B5. Accessed Oct. Financial Ratios. Tools for Fundamental Analysis. Investing Essentials. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.

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Table of Contents Expand. Formula and Calculation for EPS. EPS tells you a lot about a company, including a company's current and future profitability. EPS is easily calculated from basic financial information you can find online. There are two ways to calculate EPS: using a basic earnings per share equation, or a weighted earnings per share equation.

Here are the steps to calculate both:. Using a company's net income or earnings for the primary number is the most basic way to determine EPS. This information is normally found on their website or a financial webpage. Be careful not to mistake quarterly net income for annual. Shares outstanding is the number of shares a company has on the stock exchange.

Financial websites should have this information available for public viewing. To determine the basic earnings per share you simply divide the total annual net income of the last year, by the total number of outstanding shares. A company's net income from is 5 billion dollars and they have 1 billion shares outstanding.

Weighted earnings per share is a more accurate calculation of EPS because it considers the dividends, also known as preferred stocks, that a company issues to its shareholders. A dividend is the amount of money a company pays out to its shareholders from its profit, usually on a quarterly basis. Here's how to calculate it:.

This information is normally available on a company's website or a financial webpage. Because companies pay out these dividends to shareholders during the year, they cannot be included in annual net income. Just like the basic earnings per share calculation, the number of shares gets subtracted from the annual net income without the dividends. A company's net income from is 15 billion dollars, they pay a 2 billion dividend to shareholders over the course of the year, and they have 4 billion shares outstanding.