Diluted EPS Calculator
Compare basic and diluted earnings per share and see how much options, warrants and convertibles dilute each share of profit.
How it works
Earnings to common = net income − preferred dividends · Basic EPS = earnings ÷ basic shares · Diluted EPS = earnings ÷ diluted shares
Basic EPS divides earnings available to common shareholders by the average shares actually outstanding. Diluted EPS assumes every in-the-money option, warrant and convertible security is exercised, swelling the share count and shrinking the profit attributed to each share. Because those instruments can turn into real shares, diluted EPS is the more conservative — and the number analysts and P/E ratios usually rely on.
Worked example
A firm earns $500,000,000 with no preferred dividends. Over 100,000,000 basic shares that is $5.00 of basic EPS. Once options and convertibles lift the count to 110,000,000 diluted shares, EPS falls to 500,000,000 ÷ 110,000,000 = $4.55 — a 9.1% dilution.
Frequently asked questions
What is the difference between basic and diluted EPS?
Basic EPS uses only the shares currently outstanding. Diluted EPS adds the shares that would be created if all options, warrants and convertible securities were exercised, so it shows the worst-case profit per share.
Why is diluted EPS always lower or equal to basic EPS?
Adding potential shares to the denominator without adding proportional earnings spreads the same profit over more shares. Anti-dilutive securities are excluded, so diluted EPS can equal basic EPS but never exceed it.
Which EPS should I use for a P/E ratio?
Diluted EPS is the standard for valuation because it captures the full share count that could exist. Using basic EPS can flatter the P/E ratio of companies with heavy option programs.
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Educational estimate, not investment advice.