Diluted Shares Calculation
When calculating diluted EPS for a company, should you use the diluted shares number presented in the annual/quarterly reports or calculate it yourself through the treasury stock method?
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Use the diluted number provided in the press release or 10-Q for EPS calculation.
most people expect you to use the treasury stock method if you work at a fundamental shop
does it add value for you to do this? sometimes it does, but these cases are rare. that said, people almost always take the time to do this in my experience.
The diluted share count reported in GAAP financials are already calculated using the treasury stock method...
if you hand calculate as most people do it will rarely match what is reported in company financials.
the cases where it REALLY matters are where share price has moved from date of the 10-Q / 10-K and this affects dilution from converts / options. imagine for example that for the Q ended march 30 you report these results mid-year and your stock rises 100% which makes more converts / options in the money. this would change diluted shares.
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