EPS – Earnings Per Share

The EPS formula does not include preferred dividends for categories outside of continued operations and net income. Earning per share for continuing operations and net income are more complicated in that any preferred dividends are removed from net income before calculating EPS.

The portion of a company’s profit allocated to each outstanding share of common stock earning per share serves as an indicator of a company’s profitability. 

EPS     =          Earnings (Profit)

Weighted number of equity shares in issue

When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time.  However, data sources sometimes  simplify the calculation by using the number of shares outstanding at the end of the period.

Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number.