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EPS = (Net Income- Preferred Dividends)/ Weighted Average Shares Outstanding. eps formula is applied by analysts since it provides a true ratio of profitability on a per-share basis. The calculation is done by subtracting any preferred dividends in order to come up with income that is available to common shareholders. Weighted average shares would be effective to provide equity in cases where shares vary across the year. The formula is useful in value determination of the company, in comparison of performance with time and in the movement of stock prices. The figure used by investors is always the EPS to know how successful a business is when transforming revenue into profit.