What is earnings per share?

To calculate basic earnings per share, first subtract any minority interests and preferred dividends from the company’s net profit or loss. Then divide the result by the average number of common shares outstanding. 

Basic EPS = (Net profit or loss – preferred dividends – minority interests) ÷ Average shares outstanding

Diluted EPS is a more complex calculation, adjusting both net profit or loss and the number of shares to account for outstanding options and other potentially dilutive securities such as warrants, convertible securities and contracts that can be settled in shares. 

EPS is a key component of the price/earnings (P/E) ratio, a company’s stock price divided by earnings per share. Most investors look at P/E ratios when considering whether to buy or sell a stock. 

Example: “Loblaw’s net earnings attributable to shareholders was $2,100 million in 2023. After paying $12 million in dividends to preferred shareholders, the company had $2,088 million available to common shareholders. With an average 316.7 million shares outstanding, this resulted in basic earnings per common share of $6.59.”

($2,100 million – $12 million) ÷ $316.7 million = $6.59

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