Earnings Per Share (Diluted)

What is Diluted EPS?

EPS shows how much profit a company makes for each share a shareholder owns. Diluted EPS is slightly different as it shows earnings per share if all potential shares from things like stock options, convertible debt, and warrants were converted into regular shares.

Formula:

Diluted EPS = (Net Income - Preferred Dividends) / (Average Shares Outstanding + Convertible Securities)

Why is Diluted EPS important?

Diluted EPS helps investors see how a company’s earnings would be spread across all shares if all potential shares were converted into common stock. It gives a more conservative view of earnings per share and helps shareholders understand the potential impact of things like stock options and convertible debt on their share of the company’s profits.