Cash Earnings Per Share (Cash EPS)

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Cash earnings per share (Cash EPS) is a profitability ratio that compares a company’s cash flow against their volume of shares outstanding. It is unique from the more widely used net profit metric, earnings per share (EPS), which only considers net income per share.

Cash EPS doesn’t take into account any non-cash elements. For example, it doesn’t include depreciation which is part of profit-based earnings per share calculations. Because of this, CEPS can be a more accurate measurement of a company’s financial and operational states. The bigger a company’s CEPS,  the better its performance is believed to be over for the particular period considered.

The CEPS ratio comes in handy when comparing trends within a company, and trends among different companies in like industries.

Cash Earnings Per Share Formula

Cash\: EPS = \dfrac{\text{Operating Cash Flow}}{\text{Number of Shares Outstanding}}

​All the data needed to calculate cash EPS can be found in the financial statements and notes to accounts. For the most accurate CEPS calculation, it is crucial to determine all of the non-cash elements in the income statement.

Operating cash flow, which is indicated in a company’s cash flow statement, is simply EBITDA with the addition of change in working capital and all other non-cash modifications. The number of shares outstanding may be basic or diluted and are found in the notes to accounts, and all the rest are included in the income statement.

When a company has high cash earnings, it may indicate that they are performing very well. Analysts usually consider the annual growth rate of the ratio over a number of years. As a result, this means a high growth rate over time is a positive sign.

The CEPS of one company may also be compared with those of other companies within the same industry and with similar product varieties. This is one key benefit offered by CEPS over regular EPS. Because CEPS may be adjusted for all non-cash items, largely drawn from management estimates, it enables analysts to compare the values for several companies.

Cash Earnings Per Share Example

Frank is considering an investment opportunity in Vedder Boats. Their operating cash flow in 2019 was recorded at $280 million. This was an increase of $40 million from its operating cash flow in 2018. Meanwhile in 2017, this value was calculated at $200 million.

The boat maker’s number of shares outstanding was also at an uptrend within the same period: in 2017, it was at 40 million, followed by 50 million in 2018, and finally, 60 million in 2019.

Frank would like to understand the mechanics between the business’ operating cash flow and the number of shares outstanding from 2017 to 2019. What were the company’s Cash EPS values within the specified period?

Here are the values for each year (in thousands):


  • Operating Cash Flow: 200,000
  • Shares Outstanding: 40,000


  • Operating Cash Flow: 240,000
  • Shares Outstanding: 50,000


  • Operating Cash Flow: 280,000
  • Shares Outstanding: 60,000

Now let’s use our formula:

CEPS\: 2017 = \dfrac{200{,}000}{40{,}000} = 5 CEPS\: 2018 = \dfrac{240{,}000}{50{,}000} = 4.8 CEPS\: 2019 = \dfrac{280{,}000}{60{,}000} = 4.67

The company has been increasing its yearly operating cash flow but we can see that the cash earnings per share are decreasing. This is due to the rising number of shares, which means the cash profit made for each share is going down.

Cash Earnings Per Share Analysis 

Another important aspect of the CEPS is the large discrepancy between normal EPS and CEPS. If the gap is at least half or more, this is considered large. It could be a sign that the management has been employing clever accounting techniques to hide the company’s actual performance. But this gap must be examined from a practical viewpoint as well. For instance, you could consider the company’s capital investment or M&A activity. Both of these can affect the non-cash items included in the income statement.

Let’s go back to our example. The rise in the company’s cash earnings could be due to the company’s increased issuance of equity shares to finance its growth agenda. An expansion plan like this might be earnings accretive over the long term. Or the rise in the number of shares may be due to the increased conversion of stock options, which is not part of the company’s operational growth.

Analysts must go deeper to know what is actually causing the decrease or increase to better understand the company’s financial status. In some cases, to offset the dilution of stock options, a company may buy back from the open market provided the price is good.  

Although CEPS is a very potent tool for examining a company’s financial health, it must be meticulously analyzed. And there must be a clear separation of cash and non-cash items, which is only possible with a detailed look into each line item.

Moreover, analysts should pay particular attention to stock options’ diluting effects. They should use the diluted number of shares to calculate financial performance. The CEPS should also be appreciated with consideration for the business cycle, management objectives, and industry dynamics.

Among the most important advantages of the CEPS is its handiness as a metric for pricing stocks. This is because it makes higher EPS stocks demand attract higher prices. The ratio also represents the total profit per share once all the liabilities, such as debt interest, preference dividends, and the like, have been paid off.  

Cash Earnings Per Share Conclusion

  • The cash earnings per share is a performance metric that considers the relationship between a company’s cash flow to its number of shares outstanding.
  • This formula requires two variables: cash flow and diluted number of shares outstanding.
  • The cash earnings per share ratio is usually expressed as a plain decimal number.
  • While CEPS is a very handy ratio for investors, it must be analyzed alongside share price before any valid insights could be gleaned.
  • For a more accurate CEPS calculation, any changes in the outstanding number of shares caused by share buybacks, stock split, and other factors, must be monitored.

Cash Earnings Per Share Calculator

You can use the cash earnings per share calculator below to quickly determine the ratio between a company’s cash flow and the number of shares outstanding, by entering the required numbers.