Diluted EPS is a calculation used to gauge the quality of a company's earnings per share (EPS) if all convertible securities were exercised. ... The diluted EPS will usually be lower than the simple or basic EPS but in the rare case that there are anti-dilutive securities it may be higher.

Why is diluted EPS important?

Diluted EPS is important for shareholders simply because it lays down the earnings that a shareholder would get in the worst of the scenarios. If a public listed entity has more of different stock types in its capital framework, it should provide information pertaining to both diluted EPS and Basic EPS.

Why do we calculate fully diluted shares?

This number of shares is needed for a company's earnings per share (EPS) calculations because applying fully diluted shares increases the share basis in the calculation while reducing the dollars earned per share of common stock.