How to Calculate Earnings Per Share
Locate the company's net earning or net income from the previous year., Figure out how many shares are outstanding., Divide the net income by the number of shares outstanding.
Step-by-Step Guide
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Step 1: Locate the company's net earning or net income from the previous year.
This information can be found on most financial webpages, or on the company's website.
Using the company's net earnings or income as the primary number in the calculation is the most basic way of determining EPS.
For example, say you want to calculate the EPS of Microsoft based on its net income.
A quick browse of Microsoft's website tells you that in 2012, the company's net income was almost $17 billion.Be careful not to mistake a company's quarterly net income with their annual net income.
Quarterly profit is calculated every three months, whereas annual profit is calculated every 12 months.
Mistaking a company's quarterly net income for their annual net income will cause your calculation to be roughly four times smaller. -
Step 2: Figure out how many shares are outstanding.
How many total shares does a company have on the stock exchange? This information can be collected by visiting a financial website and locating the company's information.
Again, let's continue with the example of Microsoft.
As of the time of writing, Microsoft has
8.33 billion shares outstanding., Taking Microsoft's vitals as our example, we'd divide $17 billion by
8.33 billion and come away with a basic EPS of
2.Take another basic example.
Let's say a bocce ball company has a net income of $4 million and 575,000 shares outstanding.
We divide $4 million by 575,000 and come up with an EPS of
6.95. -
Step 3: Divide the net income by the number of shares outstanding.
Detailed Guide
This information can be found on most financial webpages, or on the company's website.
Using the company's net earnings or income as the primary number in the calculation is the most basic way of determining EPS.
For example, say you want to calculate the EPS of Microsoft based on its net income.
A quick browse of Microsoft's website tells you that in 2012, the company's net income was almost $17 billion.Be careful not to mistake a company's quarterly net income with their annual net income.
Quarterly profit is calculated every three months, whereas annual profit is calculated every 12 months.
Mistaking a company's quarterly net income for their annual net income will cause your calculation to be roughly four times smaller.
How many total shares does a company have on the stock exchange? This information can be collected by visiting a financial website and locating the company's information.
Again, let's continue with the example of Microsoft.
As of the time of writing, Microsoft has
8.33 billion shares outstanding., Taking Microsoft's vitals as our example, we'd divide $17 billion by
8.33 billion and come away with a basic EPS of
2.Take another basic example.
Let's say a bocce ball company has a net income of $4 million and 575,000 shares outstanding.
We divide $4 million by 575,000 and come up with an EPS of
6.95.
About the Author
Michael Foster
Dedicated to helping readers learn new skills in hobbies and beyond.
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