how to find earnings per share of common stock

Earnings per Share (EPS) of Common Stock — How to Find and Calculate It

This article explains how to find earnings per share of common stock (basic and diluted), how regulators require it to be presented, where to source the inputs in company filings, worked numeric examples, common pitfalls, and a practical checklist you can use right away.

As of June 1, 2024, according to the Financial Accounting Standards Board (FASB) guidance and Investor.gov/SEC resources, companies are required to present both basic and diluted EPS on the face of the income statement for each period presented, with supporting disclosures in the notes. This guide shows how to locate and compute EPS from public filings and other common data sources.

Note: this article focuses on U.S. GAAP presentation and practice for common stock EPS. It is educational and not investment advice.

how to find earnings per share of common stock — what you will gain

• A clear definition of EPS and why it matters.
• Exact steps to compute basic and diluted EPS from a company's 10‑K or 10‑Q.
• Practical guidance for finding numerators and denominators in filings and data providers.
• One or two worked numeric examples and a ready checklist.

Definition and Purpose

Earnings per share (EPS) measures the amount of a company's profit or loss allocated to each share of its common stock. In practical terms, EPS helps investors compare profitability on a per‑share basis and is a key input to valuation metrics such as the price‑to‑earnings (P/E) ratio.

When readers ask how to find earnings per share of common stock, they typically mean two related figures presented under U.S. GAAP:

• Basic EPS: Net income available to common shareholders divided by the weighted‑average number of common shares outstanding.
• Diluted EPS: A measure that includes the effect of potentially dilutive common shares (options, warrants, convertible securities) that could reduce EPS if converted or exercised.

Both measures are usually shown on the income statement for each period presented and explained further in the notes.

Regulatory and Accounting Framework

U.S. GAAP guidance for EPS is primarily in ASC Topic 260 (Earnings per Share). The FASB has issued updates (including ASU 2020‑06) that affect how certain convertible instruments are accounted for, which in turn can change diluted EPS presentations.

As of June 1, 2024, authoritative preparer and investor guidance (ASC 260 and SEC/Investor.gov materials) continues to require clear presentation of basic and diluted EPS and disclosure of methods and potential common shares.

ASC 260 and Key Requirements

• ASC 260 requires companies to present basic and diluted EPS for income from continuing operations, net income, and any other items reported that require EPS disclosure.
• The standard specifies how to compute the numerator and denominator for basic and diluted EPS, and it prescribes methods such as the treasury stock method and the if‑converted method for potential common shares.
• ASC 260 requires disclosure of a reconciliation of the numerator (net income) and denominator (weighted‑average shares) used in computing basic and diluted EPS, and an explanation of the instruments considered in dilution.

SEC and Investor Guidance

• The SEC and Investor.gov emphasize clear, prominent disclosure of EPS on the income statement and caution about non‑GAAP adjusted EPS measures—companies must reconcile non‑GAAP figures to GAAP EPS and explain adjustments.
• Investor.gov guidance is intended to help retail investors understand EPS and the effects of dilution and non‑GAAP adjustments.

Components of the EPS Calculation

how to find earnings per share of common stock begins with understanding the two components: the numerator and the denominator.

Numerator — Net Income Available to Common Shareholders

• Start with net income (loss) attributable to the parent company from the income statement.
• Subtract preferred dividends (and other distributions obligation to non‑common shareholders) to obtain net income available to common shareholders. For example, if net income is $10 million and cumulative preferred dividends are $1 million, the numerator is $9 million.
• Adjust the numerator for items required by ASC 260 when computing diluted EPS; for example, if convertible preferred stock is assumed converted under the if‑converted method, associated preferred dividends are added back to net income.
• Treatment of discontinued operations: report EPS for continuing operations and for net income (which includes discontinued operations), as required by ASC 260.

Denominator — Weighted‑Average Shares Outstanding

• The denominator is the weighted‑average number of common shares outstanding during the reporting period. Weighting accounts for the timing of issuances and repurchases.
• Typical adjustments include:
  • Adding shares issued mid‑period weighted for the portion of the period they were outstanding.
  • Subtracting shares repurchased mid‑period weighted similarly.
  • Including shares issued in stock dividends or splits on a retrospective basis.
• For diluted EPS, the denominator is increased by incremental common shares from potential dilutive securities computed under the treasury stock or if‑converted methods.

Effects of Stock Splits and Stock Dividends

• Stock splits and stock dividends require retrospective adjustment of prior‑period share counts and EPS so that EPS is comparable across periods.
• If a one‑for‑two stock split occurs after the period, prior period EPS must be restated as if the split occurred at the beginning of the earliest period presented.

Basic EPS — Formula and Step‑by‑Step Calculation

Formula:

Basic EPS = (Net income (loss) attributable to common shareholders) / (Weighted‑average common shares outstanding)

Step‑by‑step:

1. Open the company’s income statement in the latest 10‑Q or 10‑K and identify net income (loss).
2. Subtract preferred dividends and other non‑common distributions to get net income available to common.
3. Open the statement of shareholders’ equity and the notes to find shares outstanding and recent issuances or repurchases.
4. Compute the weighted‑average shares outstanding for the period (many companies disclose this number under EPS footnotes; if not, compute time‑weighted shares).
5. Divide the numerator by the denominator and report the result as basic EPS.
6. Verify that the company’s reported basic EPS matches your calculation; reconcile differences using footnotes (e.g., rounding, treasury shares treatment).

Diluted EPS — Concept and Calculation

Diluted EPS reflects the effect of securities that could become common shares and thereby dilute per‑share ownership.

• Diluted EPS is never greater than basic EPS; it is equal when no potentially dilutive securities exist.
• When calculating diluted EPS, include only securities that are dilutive — that is, their inclusion reduces EPS.

Potential Common Shares and Dilutive Instruments

Common examples of instruments that may be dilutive:

• Stock options and warrants granted to employees and others.
• Restricted stock units (RSUs) or performance awards.
• Convertible debt and convertible preferred stock.
• Contingently issuable shares that are issuable upon achievement of certain conditions.

A company’s notes will describe the types and amounts of such instruments and any conversion/exercise terms.

Treasury Stock Method (for options and warrants)

• Under the treasury stock method, options and warrants are assumed exercised at the beginning of the period (or at grant date if later).
• The company is assumed to use the proceeds (exercise price multiplied by number of options) to repurchase shares at the average market price, and only the net incremental shares remain outstanding (incremental shares increase denominator).

Example logic:

• Options outstanding: 1,000; exercise price: $10; average market price: $20.
• Proceeds from exercise = $10 * 1,000 = $10,000.
• Shares repurchased at $20 = $10,000 / $20 = 500.
• Incremental shares = 1,000 - 500 = 500.

If‑Converted Method (for convertibles)

• For convertible debt or preferred stock, assume conversion at the beginning of the period (or at issuance if later).
• Add the shares issuable on conversion to the denominator.
• Add related interest expense (net of tax) or preferred dividends back to the numerator because these items would not be payable to common shareholders after conversion.

Anti‑dilutive Securities

• Securities that would increase EPS if included are anti‑dilutive and must be excluded from diluted EPS.
• Companies disclose when instruments are anti‑dilutive and typically reconcile diluted EPS excluding them.

Two‑Class and Participating Securities

• The two‑class method applies when a company has multiple classes of common stock or participating securities with different rights to earnings.
• Participating securities share in earnings with common shareholders; ASC 260 requires allocation of earnings to participating securities before computing EPS attributable to common shareholders.
• The allocation is typically based on contractual participation features (e.g., preferred shares that also participate in dividends beyond a fixed rate).

If you’re researching how to find earnings per share of common stock for companies with participating securities, review the EPS footnote and the terms of the participating securities to compute proper allocation.

Interim Reporting and Retrospective Adjustments

• For interim periods (quarterly 10‑Qs), companies compute basic and diluted EPS consistent with ASC 260, using weighted‑average shares for the interim period.
• Restatements or retrospective adjustments are required for stock splits and stock dividends; prior reported EPS must be adjusted for comparability.

Where to Find the Inputs (Practical Sources)

how to find earnings per share of common stock in practice involves consulting a handful of primary documents and common secondary sources.

SEC Filings (10‑K, 10‑Q, 8‑K)

• Income statement: shows net income (loss) and often reports basic and diluted EPS on the face of the statement.
• Notes to consolidated financial statements: EPS note contains reconciliations of numerators and denominators, explanation of potentially dilutive securities, and methods used.
• Statement of shareholders’ equity and balance sheet: provide shares outstanding and changes during the period.
• Management discussion & analysis (MD&A) and risk factors: may describe share plans and contingencies that affect dilution.

When learning how to find earnings per share of common stock, the EPS footnote in the 10‑K/10‑Q is the single best place to start.

Company Press Releases and Earnings Releases

• Companies typically disclose basic and diluted EPS in quarterly and annual earnings releases and will highlight any material adjustments (non‑GAAP measures).
• Press releases often include reconciliations for adjusted EPS (non‑GAAP) and brief descriptions of share count movements.

Financial Data Providers and Platforms

• Financial platforms and brokerage portals report GAAP basic and diluted EPS based on company filings. These services may also provide historical EPS data and adjusted EPS.
• If you use a third‑party provider, verify figures against the company’s filings because methodologies and rounding can differ.
• For crypto‑native tools and wallets that also include securities tools, consider Bitget Wallet for portfolio tracking of digital assets; for equities research, rely on SEC filings or established financial data providers.

Worked Examples

Below are two concise examples that demonstrate how to compute basic and diluted EPS step‑by‑step. These numeric examples show the calculations and the logic used to include or exclude instruments.

Example 1 — Basic EPS (simple case)

Assume the following for Company A for the year:

• Net income = $12,000,000
• Preferred dividends = $1,000,000
• Weighted‑average common shares outstanding = 4,000,000

Compute basic EPS:

• Numerator (net income available to common) = $12,000,000 - $1,000,000 = $11,000,000
• Denominator = 4,000,000 shares
• Basic EPS = $11,000,000 / 4,000,000 = $2.75 per share

If the company reports basic EPS of $2.75, your calculation matches the filing.

Example 2 — Diluted EPS with Options and Convertible Debt

Assume Company B has the following for the year:

• Net income = $9,000,000
• No preferred dividends
• Weighted‑average common shares outstanding (basic) = 3,000,000
• Stock options outstanding: 200,000 options with exercise price $10; average market price during period = $20
• Convertible debt: face value $5,000,000, convertible into 250,000 shares; interest expense = $300,000 per year, tax rate = 25%

Step 1 — Basic EPS numerator and denominator:

• Basic numerator = $9,000,000
• Basic denominator = 3,000,000
• Basic EPS = $9,000,000 / 3,000,000 = $3.00

Step 2 — Options (treasury stock method):

• Options proceeds if exercised = 200,000 * $10 = $2,000,000
• Shares repurchased at average market price $20 = $2,000,000 / $20 = 100,000
• Incremental shares from options = 200,000 - 100,000 = 100,000

Step 3 — Convertible debt (if‑converted method):

• Shares issued on conversion = 250,000
• Adjust numerator: add back after‑tax interest that would not be paid post conversion = $300,000 * (1 - 0.25) = $225,000

Step 4 — Diluted EPS calculations:

• Adjusted numerator = $9,000,000 + $225,000 = $9,225,000
• Adjusted denominator = 3,000,000 + 100,000 + 250,000 = 3,350,000
• Diluted EPS = $9,225,000 / 3,350,000 ≈ $2.75

Interpretation: Basic EPS is $3.00 and diluted EPS is approximately $2.75 because the convertible debt and options are dilutive.

Common Pitfalls and Practical Considerations

When learning how to find earnings per share of common stock and computing EPS yourself, watch for these common errors:

• Failing to subtract preferred dividends from net income when computing the basic EPS numerator.
• Using the period‑end share count instead of the weighted‑average shares outstanding for the denominator.
• Applying the treasury stock method incorrectly by not using the average market price for repurchases.
• Incorrectly including anti‑dilutive securities in diluted EPS.
• Overlooking participating securities and failing to apply the two‑class method where required.
• Relying on third‑party EPS data without checking the original 10‑K/10‑Q for reconciling items.

EPS Presentation and Disclosure Requirements

• Companies must present both basic and diluted EPS on the face of the income statement for each period presented (e.g., current year, prior year).
• The EPS footnote should explain the components of the numerator and denominator and provide reconciliations from basic to diluted EPS inputs.
• Firms must disclose the method used for computing diluted EPS, the instruments included, and any instruments excluded because they are anti‑dilutive.

Interpreting EPS — Use in Valuation and Analysis

• EPS is widely used for trend analysis and cross‑company comparisons when normalized for accounting differences.
• EPS is a core input into valuation metrics such as the P/E ratio; however, EPS has limits and should not be used in isolation.
• Adjusted (non‑GAAP) EPS measures can provide insight into recurring business performance but must be reconciled to GAAP EPS.

Non‑GAAP and Adjusted EPS

• Many companies report adjusted EPS (e.g., excluding restructuring charges, certain non‑recurring items). The SEC requires transparent disclosure and reconciliation of such non‑GAAP measures to the most comparable GAAP measures.
• When you find an adjusted EPS figure, always check the reconciliation tables in the press release or 10‑Q/10‑K.

Advanced Topics and Complex Scenarios

This section summarizes complex items that can affect EPS and require careful reading of notes and professional guidance.

Convertible Instruments after ASU 2020‑06

• ASU 2020‑06 simplified certain aspects of convertible debt accounting and allowed some companies to amortize features differently. This can affect whether an instrument is treated as debt or equity and thereby influence EPS.
• As of June 1, 2024, preparer and auditor guidance reflects these changes in practice; always check company disclosures for ASU 2020‑06 effects.

Contingent Shares and Vesting Conditions

• Shares issuable upon satisfaction of contingencies or vesting conditions are included in diluted EPS only when the contingency is considered probable and the shares are issuable.
• If conditions are not met by the reporting date, the shares are excluded until they become issuable.

References and Further Reading

Primary authoritative sources to consult when you want the original guidance:

• ASC Topic 260 (Earnings per Share) in the FASB Accounting Standards Codification.
• ASU 2020‑06 and related FASB communications.
• SEC and Investor.gov educational materials on EPS presentation and non‑GAAP measures.
• Large accounting firm guides and viewpoints (KPMG, PwC, Deloitte) for practice and examples.

As of June 1, 2024, these sources remain the primary references for understanding EPS presentation and calculation under U.S. GAAP.

Quick Practical Checklist — How to Find EPS for a Given Company (Stepwise)

1. Open the latest 10‑Q (quarter) or 10‑K (annual) filing on the SEC EDGAR system or the company website.
2. Look at the income statement for net income and the reported basic and diluted EPS lines.
3. Open the EPS footnote and reconcile reported EPS to your expected calculation; note the weighted‑average shares and numerator adjustments.
4. Check the statement of shareholders’ equity and footnotes for share issuances, repurchases, stock splits, and stock compensation plans.
5. Identify convertible and option/warrant instruments in the notes; determine whether they are dilutive using treasury stock and if‑converted methods.
6. For adjusted EPS reported in press releases, locate the non‑GAAP reconciliation table and understand which items were excluded.
7. If discrepancy exists with third‑party data, reconcile by referencing the company’s filings (rounding, timing, or estimate differences are common causes).

Appendices

Appendix A: Formulas and Worked Numeric Examples

• Basic EPS = (Net income − Preferred dividends) / Weighted‑average common shares
• Diluted EPS = (Adjusted net income) / (Weighted‑average shares + incremental shares from dilutive instruments)

(See worked examples earlier in this article for step‑by‑step calculations.)

Appendix B: Glossary of Terms

• Basic EPS: Earnings per share using shares actually outstanding during the period.
• Diluted EPS: EPS calculated after including the potential dilutive effect of convertible securities, options, warrants, and similar instruments.
• Weighted‑average shares: Time‑weighted measure of shares outstanding during the period.
• Treasury stock method: Method for computing incremental shares from options/warrants assuming proceeds used to repurchase shares.
• If‑converted method: Method for convertible securities that assumes conversion at the beginning of the period.
• Participating securities: Securities entitled to share in earnings with common shareholders (requires allocation).

Appendix C: Example Locating EPS Data in a Sample 10‑K / 10‑Q

• Income statement (face): net income and EPS lines.
• Note X — Earnings per share: reconciliation of numerators and denominators and list of potentially dilutive securities.
• Statement of shareholders’ equity: changes in shares outstanding.

Practical Next Steps and Tools

• If you want to verify EPS quickly, first consult the company’s EPS footnote in the 10‑K/10‑Q.
• For portfolio tracking of digital assets or integrated portfolio tools, consider exploring Bitget Wallet’s portfolio features. For EPS figures and company research, rely on SEC filings and the EPS note as the authoritative source.

If you’d like, I can now:

• Convert the numeric examples into downloadable worksheets;
• Walk through EPS for a specific public company (I will use its SEC filings to compute basic and diluted EPS step‑by‑step);
• Or produce a printable one‑page checklist you can use when reviewing 10‑Ks and 10‑Qs.

Which would you like next?

As of June 1, 2024, the guidance summarized here reflects ASC 260 and associated FASB and SEC/Investor.gov material referenced by practitioners and auditors.