Diluted Normalized Earnings Per Share

AAA

DEFINITION of 'Diluted Normalized Earnings Per Share'

A company's profit less one-time earnings, divided by both outstanding common stock and stock owed if convertible securities were to be exercised. Diluted normalized EPS is different than regular earnings per share (EPS) because it takes into account options, dividing normalized profit by more shares. Diluted normalized EPS is more likely to be lower than regular EPS. The closer it is to regular EPS, the more stable a company's ongoing operations are. The greater the difference, the greater the risk of share dilution and unsustainable ongoing operations. Normalized earnings are earnings that have been adjusted by a company to omit irregular expenses against earnings.

BREAKING DOWN 'Diluted Normalized Earnings Per Share'

Investors pay attention to diluted normalized EPS because it gives a clearer picture of the health of a company's ongoing operations. Because it uses normalized earnings, the sale of a division is discounted and can't temporarily inflate profitability. Diluted normalized EPS also pinpoints a company with a large number of convertible securities, as these options can potentially reduce EPS and dividend payouts by increasing the number of shares on the market.

RELATED TERMS
  1. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding ...
  2. Diluted Earnings Per Share - Diluted ...

    A performance metric used to gauge the quality of a company's ...
  3. Fully Diluted Shares

    The total number of shares that would be outstanding if all possible ...
  4. Normalized Earnings

    1. Earnings adjusted for cyclical ups and downs in the economy. ...
  5. Normal Profit

    When economic profit is equal to zero; this occurs when the difference ...
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the ...
Related Articles
  1. Markets

    The 5 Types Of Earnings Per Share

    A look at the five varieties of EPS and what each represents can help an investor determine whether a company is a good value, or not.
  2. Fundamental Analysis

    Assess Shareholder Wealth With EPS

    Find out if management is doing its job of creating profit for investors.
  3. Options & Futures

    Getting The Real Earnings

    EPS helps investors analyze earnings in relation to changes in new-share capital.
  4. Options & Futures

    Understanding Rights Issues

    Not sure what to do if a company invites you to buy more shares at discount? Here are some of your options.
  5. Fundamental Analysis

    Calculating Return on Net Assets

    Return on net assets measures a company’s financial performance.
  6. Credit & Loans

    What's a Nonperforming Loan?

    A nonperforming loan is any borrowed sum where the borrower has failed to pay scheduled payments for at least 90 days.
  7. Economics

    Understanding Cost of Revenue

    The cost of revenue is the total costs a business incurs to manufacture and deliver a product or service.
  8. Economics

    Understanding Cash and Cash Equivalents

    Cash and cash equivalents are items that are either physical currency or liquid investments that can be immediately converted into cash.
  9. Economics

    Explaining Carrying Cost of Inventory

    The carrying cost of inventory is the cost a business pays for holding goods in stock.
  10. Investing

    How To Calculate Minority Interest

    Minority interest calculations require the use of minority shareholders’ percentage ownership of a subsidiary, after controlling interest is acquired.
RELATED FAQS
  1. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  2. What is the formula for calculating weighted average cost of capital (WACC) in Excel?

    When analyzing different financing options, companies need to look at how much it will cost to fund operations. There are ... Read Full Answer >>
  3. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  4. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  5. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>
  6. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  2. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  3. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  4. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  5. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  6. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!