HesapHanem

Diluted EPS Calculator

Enter net income, preferred dividends, shares outstanding and dilutive shares to get diluted and basic EPS.

How it is calculated

Diluted earnings per share is (NI − PD) / (S + D), where NI is net income, PD preferred dividends, S the weighted average common shares outstanding, and D the number of extra shares that options, warrants or convertibles would add. Basic EPS, shown beside it, is (NI − PD) / S. Money fields are in the same currency, shares are plain share counts, and the answer is shown per share in dollars to two decimals. When earnings for common holders are negative, D is left out and diluted EPS equals basic EPS: extra shares would only shrink the loss per share, so GAAP (ASC 260) and IFRS (IAS 33) treat them as anti-dilutive. You supply D yourself: the tool does not run the treasury stock method or add back convertible interest. Preferred dividends and dilutive shares may be left empty (treated as 0) but cannot be negative, and shares must be above zero.

Worked example

A company reports net income of 12,500,000 and pays 500,000 in preferred dividends. It has 10,000,000 weighted average shares and 800,000 dilutive shares from options. Earnings for common holders are 12,500,000 − 500,000 = 12,000,000. Basic EPS = 12,000,000 / 10,000,000 = $1.20. Diluted EPS = 12,000,000 / (10,000,000 + 800,000) = 12,000,000 / 10,800,000 = $1.11. Potential dilution therefore costs shareholders about 9 cents per share.

Try this example →

Common mistakes

  • Entering the total number of options or warrants as dilutive shares. Only the net new shares count, after the treasury stock method, which assumes the exercise money buys back shares at the average price.
  • Using year-end shares instead of the weighted average for the period. If shares were issued or bought back during the year, the average differs from the closing count.
  • Forgetting preferred dividends. Preferred holders are paid first, so they are subtracted from net income; leaving the field empty makes both EPS figures look higher.
  • Mixing units, such as net income in millions and shares in single units. Express both in the same scale or the per-share value will be off by a factor of a million.
  • Assuming diluted is always below basic. With a net loss the order flips: a loss of 2,000,000 on 10,000,000 shares and 800,000 dilutive shares gives basic -$0.20 and diluted -$0.19, and accounting rules generally exclude such anti-dilutive shares.

Sources

About this calculator

This calculator computes diluted earnings per share, (net income − preferred dividends) ÷ (weighted average shares outstanding + dilutive securities), and shows it side by side with basic EPS. Dilutive securities — stock options, warrants and convertible bonds — are entered as one as-if-exercised share count that you work out beforehand (for example with the treasury stock method). When earnings are positive, extra shares make diluted EPS equal to or lower than basic EPS. If earnings for common shareholders (net income less preferred dividends) are negative, the extra shares would only shrink the loss per share, so they are treated as anti-dilutive and left out, and diluted EPS equals basic EPS.

Public companies are required to report both figures on their income statement under GAAP and IFRS, and investors watch the gap between basic and diluted EPS closely, since a large gap signals significant potential share dilution that could erode existing shareholders' claim on future earnings.

Was this helpful?

You can pick up to 3 reactions.

Comments (1)

  • Editorial team

    Use the result as a cross-check against the diluted figure on a company's income statement. Enter the dilutive share count from its notes, since the tool does not work it out with the treasury stock method. With positive earnings diluted EPS can never exceed basic EPS, so a higher diluted number points to an input slip. Which dilutive security do you usually find hardest to estimate: options, warrants or convertibles?

Popular calculators

Loan Calculator

Monthly payment, total interest and full amortization schedule.

Percentage Calculator

Percent change, percent of, and ratio calculations.

Discount Calculator

Calculate final price, savings, and discount amount.

BMI Calculator

Body mass index from height and weight (metric or imperial).

Age Calculator

Compute your exact age in years, months and days from a birth date.

Compound Interest Calculator

Calculate the final amount and interest earned with compounding.

All Calculators