Adjusted EPS adds back stock-based compensation expense to net income before dividing by shares outstanding. This provides an alternative view of per-share earnings that treats stock compensation as a non-cash expense. It is useful for comparing companies with very different levels of stock compensation — particularly technology companies where SBC can represent 10-30% of revenue.
This metric is controversial. Adding back SBC increases reported earnings, but stock compensation is a real economic cost to shareholders because it dilutes their ownership. Adjusted EPS should be used alongside, not instead of, standard EPS.
Adjusted EPS = (Net Income (TTM) + Stock-Based Compensation (TTM)) / Basic Shares Outstanding
GeminIQ adds trailing twelve-month stock-based compensation back to TTM net income, then divides by period-end basic shares. All inputs are from SEC filings. Using basic shares keeps the metric on the same basis as market cap and other per-share ratios.
A: Stock-based compensation is a non-cash expense — the company does not write a check for SBC, it issues equity. Adding it back shows what earnings would be if the company paid all employees in cash instead of equity. This can be useful for understanding cash-generation capacity, but it overstates economic earnings because the dilutive effect of SBC is real.
A: Use both together. Diluted EPS gives a conservative view of per-share earnings using the fully diluted share count. Adjusted EPS shows earnings capacity before a major non-cash charge. The gap between them reveals how much of the company's earnings are being consumed by stock compensation.
A: Different platforms make different adjustments. Some add back SBC, some add back amortization of intangibles, some add back one-time charges. There is no universal definition of "adjusted EPS." GeminIQ's adjusted EPS specifically adds back SBC and nothing else, which is clearly defined and consistent across all companies.