Diluted EPS is a metric used in fundamental analysis to gauge a company’s quality of earnings per share assuming all convertible securities are exercised. Convertible securities include all outstanding convertible preferred shares, convertible debt, equity options (mainly employer-based options), and warrants.
Diluted EPS Calculation Steps:
Example Case:
ABC ltd. has employee stock options that could be converted to 1.0 crore common shares and convertible preferred shares and debt that could be converted to 2.0 crore and 1.2 crore common shares respectively.