Diluted Normalized Earnings Per Share

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.

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RELATED FAQS
  1. What does it signify about a company if there is a large difference between its EPS ...

    Learn more about basic earnings per share and diluted earnings per share, what the ratios measure and what a large discrepancy ... Read Answer >>
  2. Why is a company's diluted EPS always lower than its simple EPS?

    Learn about diluted and basic earnings per share and why a company's diluted earnings per share is usually lower than its ... Read Answer >>
  3. What is the difference between earnings per share (EPS) and diluted EPS?

    Learn about EPS and diluted EPS, what they measure, and the difference between the two. Read Answer >>
  4. Why should investors consider the fully diluted share amount?

    Learn about the importance of considering the fully diluted shares, how it could affect a stock's share price and how dilution ... Read Answer >>
  5. What's the difference between basic shares and fully diluted shares?

    Find out more about basic outstanding shares, fully diluted shares, the difference between the calculation of shares and ... Read Answer >>
  6. How do I calculate earnings per share with simple capital and complex capital structure?

    Learn the difference between simple and complex capital structures and how the structure affects a company's calculations ... Read Answer >>
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