Calculating EPS | Evaluating a Company's Financial Health | Your Online Finance Dictionary

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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When considering an investment investor should calculate EPS to be able to evaluate the company's profitably and pulse of financial health. It determined that how much investors earn on the amount they have invested.