Earnings per share (EPS) is the amount of a company's net income per share of common stock. The TTM portion of earnings per share determines a company's earnings over the previous (trailing) 12 months. Earnings per share equals the company's net income less any dividends paid on preferred stock divided by the weighted average number of common stock shares outstanding during the year. Investors use TTM earnings per share to determine a company's profitability for the past year. Companies must disclose earnings per share on their income statements.
Determine the company's net income, preferred dividends and outstanding common stock. A company discloses net income and preferred dividends on the firm's income statement. The company's balance sheet documents the amount of outstanding common stock. For example, Firm A has $100,000 of net income, $1,000 preferred dividends and 500 outstanding common shares of stock for the previous 12 months.
Subtract the preferred dividends from net income. In our example, $100,000 minus $1,000 equals $99,000.
Divide the number calculated in Step 2 by the amount of common shares outstanding to determine TTM earnings per share. In the example, $99,000 divided by 500 shares equals $198 per common share.
The common shares outstanding should be weighted. The common shares outstanding will vary if there are shares issued during the period, stock splits or other equity transactions affecting common stock.