Answer first
What this calculator tells you
Calculate earnings per share from net income, preferred dividends and average shares outstanding. Recompute EPS from the statements when you want to test a headline figure. Formula: EPS = (net income − preferred dividends) ÷ weighted average common shares outstanding. At the worked-example inputs, the earnings per share is $2.40. Holding every other input steady, moving net income from $40,000,000 to $60,000,000 moves the result from $1.90 to $2.90.
Transparent method
The formula
Recompute EPS from the statements when you want to test a headline figure.
Worked example
Example inputs
How to interpret the result
Earnings per share shrinks the whole company's profit down to what one share earns. Net income of $50 million, less $2 million owed to preferred holders, leaves $48 million for common shareholders. Spread over 20 million shares, that is $2.40 each. Preferred dividends come out first because those holders are paid before the common owners see a cent.
At the worked-example inputs the earnings per share is $2.40. It rises with net income and falls as weighted average shares outstanding and preferred dividends increase.
Investment returns are uncertain; taxes, fees, volatility and cash-flow timing can materially change results.
Before you rely on it
What to check
Use the weighted average share count for the period, not the count at year end. Buybacks and new issues during the year change the average.
The common error
Where people go wrong with earnings per share (EPS) calculator
Leaving preferred dividends in. Dividing all of net income by common shares overstates what the common holders earned.
Sensitivity evidence
How net income changes the earnings per share
Holding every other input at the worked-example value, moving net income from $40,000,000 to $60,000,000 moves the earnings per share from $1.90 to $2.90: a spread of $1.00, or 42% of the worked-example result.
| Net income | Earnings per share | Earnings available to common shareholders |
|---|---|---|
| $40,000,000 | $1.90 | $38,000,000 |
| $45,000,000 | $2.15 | $43,000,000 |
| $50,000,000worked example | $2.40 | $48,000,000 |
| $55,000,000 | $2.65 | $53,000,000 |
| $60,000,000 | $2.90 | $58,000,000 |
Every input, tested
Which input moves the earnings per share most
Of the 3 inputs, net income moves the earnings per share most ($0.50 across the range tested) and preferred dividends moves it least ($0.02).
| Input | Tested from | To | Earnings per share at each end | Swing |
|---|---|---|---|---|
| Net income | $45,000,000 | $55,000,000 | $2.15 to $2.65 | $0.50 (21%) |
| Weighted average shares outstanding | 18,000,000 | 22,000,000 | $2.67 to $2.18 | $0.48 (20%) |
| Preferred dividends | $1,800,000 | $2,200,000 | $2.41 to $2.39 | $0.02 (0.8%) |
Two variables at once
Earnings per share by net income and preferred dividends
Across the grid the earnings per share runs from $1.88 to $2.92. Moving net income from $40,000,000 to $60,000,000 shifts it by $1.00 at the middle column, and moving preferred dividends from $1,600,000 to $2,400,000 shifts it by $0.04 at the middle row, so net income is the bigger lever here.
| Net income \ Preferred dividends | $1,600,000 | $2,000,000 | $2,400,000 |
|---|---|---|---|
| $40,000,000 | $1.92 | $1.90 | $1.88 |
| $45,000,000 | $2.17 | $2.15 | $2.13 |
| $50,000,000 | $2.42 | $2.40 | $2.38 |
| $55,000,000 | $2.67 | $2.65 | $2.63 |
| $60,000,000 | $2.92 | $2.90 | $2.88 |
The highlighted cell is the worked example: $2.40.
Step by step
The worked example, input by input
| Input | Value used | What it means |
|---|---|---|
| Net income | $50,000,000 | Enter the net income used in this calculation. |
| Preferred dividends | $2,000,000 | Enter the preferred dividends used in this calculation. |
| Weighted average shares outstanding | 20,000,000 | Enter the weighted average shares outstanding used in this calculation. |
| Earnings per share | $2.40 | |
| Earnings available to common shareholders | $48,000,000 | |
Inputs, definitions and assumptions
Net income
Enter the net income used in this calculation. The prefilled worked-example value is $50,000,000.
Preferred dividends
Enter the preferred dividends used in this calculation. The prefilled worked-example value is $2,000,000.
Weighted average shares outstanding
Enter the weighted average shares outstanding used in this calculation. The prefilled worked-example value is 20,000,000.
How to use this calculator
- 1Verify the inputs. Gather net income, preferred dividends and weighted average shares outstanding from your own documents; the prefilled values are examples.
- 2Save a baseline. The worked example puts the earnings per share at $2.40. Store your own version of it as Scenario A.
- 3Test one change. Start with net income, the input with the biggest effect here: moving net income from $45,000,000 to $55,000,000 takes the earnings per share from $2.15 to $2.65, a swing of 21% of the worked-example figure.
- 4Check the extremes. At half the example net income ($25,000,000) the earnings per share is $1.15; at double ($100,000,000) it is $4.90.
People also ask
Frequently asked questions
How do you calculate earnings per share (EPS)?
EPS = (net income − preferred dividends) ÷ weighted average common shares outstanding. Enter net income in dollars and preferred dividends in dollars. At the worked-example inputs the earnings per share is $2.40.
What does the earnings per share (EPS) result mean?
Recompute EPS from the statements when you want to test a headline figure. At the worked-example inputs the earnings per share is $2.40. It rises with net income and falls as weighted average shares outstanding and preferred dividends increase.
How much does net income change the earnings per share?
Holding every other input at the worked-example value, moving net income from $40,000,000 to $60,000,000 moves the earnings per share from $1.90 to $2.90, a spread of $1.00.
What are the limits of this earnings per share (EPS) calculator?
Investment returns are uncertain; taxes, fees, volatility and cash-flow timing can materially change results. The tables on this page test net income only from $40,000,000 to $60,000,000; a value outside that range is not tabulated here.
Which input moves the earnings per share most in the earnings per share (EPS) calculator?
Ranked by how far each moves the earnings per share across the range tested: net income ($0.50, 21%), weighted average shares outstanding ($0.48, 20%) and preferred dividends ($0.02, 0.8%).
If I double net income in the earnings per share (EPS) calculator, does the earnings per share double?
Doubling it from $50,000,000 to $100,000,000 takes the earnings per share from $2.40 to $4.90, which is 2.04 times the worked-example figure. So the result scales almost exactly in proportion. Halving it to $25,000,000 gives $1.15.
How much does preferred dividends matter in the earnings per share (EPS) calculator?
The worked example uses $2,000,000. Holding every other input at its worked-example value, moving preferred dividends from $1,800,000 to $2,200,000 takes the earnings per share from $2.41 to $2.39, a swing of 0.8% of the worked-example figure.
How much does weighted average shares outstanding matter in the earnings per share (EPS) calculator?
The worked example uses 20,000,000. With the other inputs left at the worked example, moving weighted average shares outstanding from 18,000,000 to 22,000,000 takes the earnings per share from $2.67 to $2.18, a swing of 20% of the worked-example figure.
Which inputs change the earnings available to common shareholders in the earnings per share (EPS) calculator?
At the worked-example inputs it is $48,000,000. Net income takes it from $43,000,000 to $53,000,000 and preferred dividends takes it from $48,200,000 to $47,800,000.
Sources and evidence
Free Calculators Online is independent and is not affiliated with or endorsed by the source organizations. Educational estimates only.