EPS = (net income – dividends on preferred stock) / average outstanding common shares.
Let us get an understanding about the terms used in the formula above.
At times, people fail to understand the formula of EPS. For such users, using the EPS calculator is a more feasible alternative.
What is the process of calculating EPS? The formula does give a basic knowledge platform. However, going through an example is more explanatory.
Consider that you need to gauge the financial standing of a company with the following particulars.
Let us use the EPS formula mentioned above.
EPS = (net income – dividends on preferred stock) / average outstanding common shares.
Inserting the values mentioned above
EPS = (15000 – 7000)/4000
EPS = 2
There is no doubt that the EPS value is used for various concrete purposes. Some of them are listed below.
Market analysts act as a source of help for stock traders and investors. They have to portray the market flow (positive or negative) by checking the EPS of several companies. Investors decide which company to invest in by checking and calculating the percentage of share this flow. Because the percentage share matters when traders looking for investment in the stock market. Usually, a percentage calculator is used instead of EPS to calculate percentages.
By looking at the EPS value of a share, an investor can decide whether he wants to invest money or not. At times, investors want to invest in a particular sector. By comparing the EPS of a few top-rated companies in that sector, they can finalize the right selection. Similarly, what is GST, sales tax? and discounts are kept in mind before investing money.