Primary Earnings Per Share (EPS)

DEFINITION of 'Primary Earnings Per Share (EPS)'

One of two methods for categorizing shares outstanding. The other method is fully diluted earnings per share (EPS). The term "basic EPS" is more commonly used instead of "primary EPS." Basic EPS is the simpler method to categorize outstanding shares, as it uses the number of shares currently available for trading. To calculate basic EPS, divide net income by the number of shares outstanding.

BREAKING DOWN 'Primary Earnings Per Share (EPS)'

Diluted EPS is more complicated to compute, but it is considered more conservative because it takes into account all the outstanding convertible shares, warrants and options that could potentially be converted to shares that are able to be traded. If none of these financial instruments are outstanding, diluted EPS and primary EPS will be equal.


EPS can be calculated in many different ways depending on the accounting methods and assumptions the company uses; investors taking EPS into account in any decision-making process should understand how the EPS figure they are using was calculated.

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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. 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 >>
  3. 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 >>
  4. 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 >>
  5. What is the difference between weighted average shares outstanding and basic weighted ...

    Outstanding shares refers to stock that is currently held by investors, including shares held by the public, and restricted ... Read Answer >>
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