Earnings per share, or EPS, is a ratio that divides a company’s earnings by the number of shares outstanding to evaluate profitability and gain a pulse of the company’s financial health. In its most basic form, it is calculated as:
EPS = (Net Income) / (Common Stock Outstanding
Net Income, divided by the shares of outstanding Common Stock.
To get a more accurate projection of earnings on a per share basis, both Net Income and Common Stock are often adjusted by investors.
These values are found on the income statement and balance sheet.
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0:00 Calculating Earnings Per Share (EPS)
0:43 Three EPS Calculations
1:06 Adjustments to Net Income
1:55 Adjustments to Common Stock Outstanding
2:26 Share Dilution
2:40 EPS Question & Application
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