Cash EPSĬash EPS is used to know the EPS earned on the exact cash earnings of the company. This provides the true earnings of the company in the normal course of business and thereby the normal EPS that is earned by the shareholders. It removes any extraordinary item or non-recurring or non-regular item from the calculation of EPS. Adjusted EPSĪdjusted EPS is also crucial as it reflects the earnings of the company in the normal course of business. Although the data of the company is not factual and is budgeted based on assumptions and past trends, forward EPS is crucial for the company and investors in making investment decisions. It is based on the projected earnings of the company for the following financial year. Forward EPSįorward EPS is one of the most important factors that is often reviewed by investors and analysts. The company can use the factual data of the quarters that have been declared and can use the budget and values for the future quarters of the year. Current EPSĬurrent EPS is calculated based on the date of the current year. The net profit of the company in the past year and their outstanding shares held by the company at the end of the year are considered in the calculation of trailing EPS that data is past data it can be used only as a reference point and does not imply that the current EPS and the future EPS would be the same 2. It is calculated based on the data of the previous year of the company. Trailing EPS is also known as trailing twelve months EPS. ![]() Some of the basic types of EPS are mentioned below, 1. When a company is not providing adequate returns, the investor can view the EPS and other financial ratios of other companies in the same industry to alter their portfolio and ensure maximum profitability. Moreover, reviewing the EPS of the shares held in the portfolio as well as other competitive shares in a similar segment ensures that the portfolio of the investor is profitable. EPS is regularly reviewed by financial analysts, investors, as well as the management of the company to ensure that the company is on the right track.įrom the investor’s point of view, a company providing consistently higher EPS is a safe bet for long-term investment in the shares of such a company. If a company is consistently providing higher EPS, then such a company is considered to be highly profitable and has a stable business model EPS with good growth aspects. What is the importance of EPS?ĮPS is an important financial tool to determine the financial health of a company. The EPS, in this case, can be calculated as under.ĮPS = Rs. The total number of outstanding ordinary shares of the company is 40,000. ![]() 1,00,000 and the preference dividend to be paid is Rs. Let us consider the following example to understand the calculation of EPS better.Ĭompany A has declared post-tax returns of Rs. The net profit after tax and preference dividends shows the actual returns earned by the shareholders for a given period of time. Preference dividends are paid first out of the profit after tax as preference shareholders have a higher claim to the post-tax returns than the equity shareholders. How is EPS calculated?ĮPS = (Profit after Tax – Dividend on Preference Shares) / Total number of outstanding shares of a company These shares are the common shares or the ordinary shares and do not include the preference shares of the company. EPS are the true returns earned on the outstanding shares of the company. ![]() These returns allow the investors to get the true picture of the returns generated by their portfolio for the various shares held by them. What is Earnings Per Share(EPS)?ĮPS or earnings per share are post-tax returns distributed by the company to its shareholders. Given below is the meaning of the term EPS and the relevant details for the same.
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