Earning Per Share (EPS)

EPS (Yearly)Earnings per share (EPS) is the monetary value of earnings per each outstanding share of a company’s common stock. Listed company is required by security regulatory to announce its Net Income as part of financial statement each quarter.  The formula for EPS is:

Earnings Per Share

Net Income is obtained from Financial Statement of the company while Weighted Avg Outstanding Shares. If the No of Outstanding shares never change throughout the period of calculation, the weighted avg outstanding shares is essentially the total no of outstanding shares.  When the amount of common shares changes mid-year, the “per share” portion requires additional calculation. The per share portion is weighted based on the length of time each number of shares is in effect.
An example of the weighted average would be a company who has 80,000 outstanding common shares for 9 months and due to issuing new common stocks, has 120,000 outstanding shares for the remaining 3 months. The weight for 80,000 share would be 9/12(.75) and the weight for 120,000 shares would be 3/12(.25).
To calculate the weighted average from the example:
(.75)80,000 + (.25)120,000 = 60,000 + 30,000 = 90,000

My consideration on EPS would be on Quarter on Quarter comparison and also Year on Year comparison. Quarter on Quarter is basically comparing the Earning Per Share for the current quarter with the Earning Per Share for the same quarter last year. The purpose of performing this comparison is to ensure the seasonal factors are taken into consideration when comparing the earning. Some stocks perform better beginning of the year while some performing better end of the year. It is just not fair to compare Q2 against Q1 for the same year though we need to consider Quarter to Quarter growth.

For KLSE, a good source to obtain EPS data would be using KLSE Screener which comes free of charge.EPS Q-on-QShown above is a screenshot of the Quarter Report section of the KLSE Screener. In the above example, EPS for this stock was 7.39 sen for Quarter 2, and it is higher than 6.19 recorded in the same quarter last year. Similarly, the ones circled in green are comparing Q1 with Q1 of the last year. With this, you can at least work out the growth rate of EPS (in this instance, it is a 19.4% jump in EPS for Q2 this year comparing to last year) which is a good sign. A good investor would also read its quarter report to understand what contributed to the rise in EPS if any.

I would not suggest judging a buy or sell based just on a single quarter result. One should at least scrutinize into the overall trend of the EPS to pinpoint if the company is doing better or worse in a bigger picture.

EPS on yearly basis is a common indicator of how well a company is capable in generating income for the shareholders.  I use equitiestracker (http://www.equitiestracker.com/) what comes free with my stock broking platform to obtain yearly EPS. A snapshot of the information is as follow.

EPS (Yearly)

The example above shows that this company’s EPS encountered a decline from 29.43 to 24.66 year-on-year. In fact, looking beyond last year, it showed a declining trend from 2012 to 2013, then from 2013 to 2014.

Depends on other value investing screening factors combined, you might rule this counter out from your investment for now, baring other positive factors which might out rule the EPS factor. But, as I said, a declining earning could be telling a not so exciting story about this company and it warrants a scrutiny into the company’s annual report to understand the reasons behind before putting your money into it.

 

1 Comment

  1. business development

    Your ideas and words are easy to understand for anyone like me.

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