Diluted EPS Calculator
Calculate diluted earnings per share including all convertible securities.
Enter net income, preferred dividends, shares outstanding, and dilutive instruments.
Earnings per share (EPS) measures how much of a company’s profit is attributable to each share. Diluted EPS is the conservative version — it assumes every convertible security that could become a share already has.
Basic EPS = (Net Income - Preferred Dividends) / Weighted Average Shares Outstanding
Diluted EPS = (Net Income - Preferred Dividends) / (Weighted Average Shares + Dilutive Securities)
Dilutive securities include stock options, warrants, convertible bonds, and convertible preferred stock. When these instruments are exercised or converted, they increase the share count and shrink the EPS figure.
The dilution percentage shows how much the exercise of all dilutive securities would reduce earnings per share:
Dilution = (Basic EPS - Diluted EPS) / Basic EPS x 100
Why this matters: basic EPS is what you earned on shares already outstanding. Diluted EPS is what you would have earned if everyone who could claim a share already had. For a company with significant employee stock option plans or convertible debt, the gap between the two can be meaningful.
The SEC requires publicly traded companies to report both figures. Analysts almost always use diluted EPS for valuation — it is the more conservative and more complete number.
A few edge cases: if a convertible security is antidilutive (exercising it would increase EPS rather than decrease it), it is excluded from the diluted calculation. This occasionally happens when a convertible bond carries interest that, when added back to net income, more than offsets the share count increase.
For most analysis, the P/E ratio you see on financial data sites uses diluted EPS.