What is Earnings Per Share EPS? Meaning, Formula + Example

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What are Adjusted Earnings Per Share

  1. Basic earnings per share does not factor in the dilutive effects of convertible securities.
  2. Basic EPS includes all of the company’s outstanding shares, while diluted EPS includes shares, stock options, warrants, and restricted stock units.
  3. However, relying solely on EPS for investment decisions should be done with other financial metrics and a comprehensive analysis of a company’s overall financial health.
  4. When dealing with stock options and warrants, dilution is assumed ONLY if the derivative’s strike price is less than the average market price of the stock throughout the year.
  5. Nonetheless, It is common practice for active investors and equity analysts to focus on non-GAAP or adjusted, Earnings Per Share figures.
  6. Let us take a look at the advantages and disadvantages of stock option benefits.

How to read an earnings report