Earningspershare每股收益.docx

Earningspershare每股收益.docx

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Earningspershare每股收益

Earningspershare

Earningspershare（EPS）isthemonetaryvalueofearningspereachoutstandingshareofacompany'scommonstock.

IntheUnitedStates,theFinancialAccountingStandardsBoard（FASB）requirescompanies'incomestatementstoreportEPSforeachmajorcategoryoftheincomestatement:

continuingoperations,discontinuedoperations,extraordinaryitems,andnetincome.

CalculatingEPS

Preferredstockrightshaveprecedenceovercommonstock.Therefore,dividendsdeclaredonpreferredsharesaresubtractedbeforecalculatingtheEPS.Whenpreferredsharesarecumulative,theannualdividendsaredeductedwhethertheyhavebeendeclaredornot.DividendsinarrearsarenotrelevantwhencalculatingEPS.

Earningspershare（basicformula）

Earningspershare（netincomeformula）

Earningspershare（continuingoperationsformula）

References

∙Wikipedia

Earningpershare,alsocallednetincomepershare,isa marketprospectratio thatmeasurestheamountofnetincomeearnedpershareofstockoutstanding.Inotherwords,thisistheamountofmoneyeachshareofstockwouldreceiveifalloftheprofitsweredistributedtotheoutstandingsharesattheendoftheyear.

Earningspershareisalsoacalculationthatshowshowprofitableacompanyisonashareholderbasis.Soalargercompany'sprofitspersharecanbecomparedtosmallercompany'sprofitspershare.Obviously,thiscalculationisheavilyinfluencedonhowmanysharesareoutstanding.Thus,alargercompanywillhavetosplititsearningamongstmanymoresharesofstockcomparedtoasmallercompany.

Formula

Earningspershareorbasicearningspershareiscalculatedbysubtractingpreferreddividendsfromnetincomeanddividingbytheweightedaveragecommonsharesoutstanding.Theearningspershareformulalookslikethis.

You'llnoticethatthepreferreddividendsareremovedfromnetincomeintheearningspersharecalculation.ThisisbecauseEPSonlymeasurestheincomeavailabletocommon stockholders.Preferreddividendsareset-asideforthepreferredshareholdersandcan'tbelongtothecommonshareholders.

Mostofthetimeearningpershareiscalculatedforyear-endfinancialstatements.Sincecompaniesoftenissuenewstockandbuybacktreasurystockthroughouttheyear,theweightedaveragecommonsharesareusedinthecalculation.Theweightedaveragecommonsharesoutstandingiscanbesimplifiedbyaddingthebeginningandendingoutstandingsharesanddividingbytwo.

Analysis

Earningpershareisthesameasanyprofitabilityormarketprospectratio.Higherearningspershareisalwaysbetterthanalowerratiobecausethismeansthecompanyismoreprofitableandthecompanyhasmoreprofitstodistributetoitsshareholders.

Althoughmanyinvestorsdon'tpaymuchattentiontotheEPS,ahigherearningspershareratiooftenmakesthestockpriceofacompanyrise.Sincesomanythingscanmanipulatethisratio,investorstendtolookatitbutdon'tletitinfluencetheirdecisionsdrastically.

Example

QualityCo.hasnetincomeduringtheyearof$50,000.Sinceitisasmallcompany,therearenopreferredsharesoutstanding.QualityCo.had5,000weightedaveragesharesoutstandingduringtheyear.Quality'sEPSiscalculatedlikethis.

Asyoucansee,Quality'sEPSfortheyearis$10.ThismeansthatifQualitydistributedeverydollarofincometoitsshareholders,eachsharewouldreceive10dollars.

UnderstandingEarningsPerShare

Oneofthechallengesofevaluatingstocksisestablishingan“applestoapples”comparison.WhatImeanbythisissettingupacomparisonthatismeaningfulsothattheresultshelpyoumakeaninvestmentdecision.

ComparingthepriceoftwostocksismeaninglessasIpointoutinmyarticle “WhyPer-SharePriceisNotImportant.”

Similarly,comparingtheearningsofonecompanytoanotherreallydoesn’tmakeanysense,ifyouthinkaboutit.Usingtherawnumbersignoresthefactthatthetwocompaniesundoubtedlyhaveadifferentnumberofoutstandingshares.

Forexample,companiesAandBbothearn$100,butcompanyAhas10sharesoutstanding,whilecompanyBhas50sharesoutstanding.Whichcompany’sstockdoyouwanttoown?

Itmakesmoresensetolookatearningspershare（EPS）foruseasacomparisontool.Youcalculateearningspersharebytakingthenetearningsanddividebytheoutstandingshares.

EPS=NetEarnings/OutstandingShares 

Usingourexampleabove,CompanyAhadearningsof$100and10sharesoutstanding,whichequalsanEPSof10（$100/10=10）.CompanyBhadearningsof$100and50sharesoutstanding,whichequalsanEPSof2（$100/50=2）.

So,youshouldgobuyCompanyAwithanEPSof10,right?

Maybe,butnotjustonthebasisofitsEPS.TheEPSishelpfulincomparingonecompanytoanother,assumingtheyareinthesameindustry,butitdoesn’ttellyouwhetherit’sagoodstocktobuyorwhatthemarketthinksofit.Forthatinformation,weneedtolookatsomeratios.

Beforewemoveon,youshouldnotethattherearethreetypesofEPSnumbers:

∙TrailingEPS–lastyear’snumbersandtheonlyactualEPS

∙CurrentEPS–thisyear’snumbers,whicharestillprojections

∙ForwardEPS–futurenumbers,whichareobviouslyprojections

Thearticlesinthisseries:

3Ways

HowtoCalculateEarningsPerShare

ThreeMethods:

BasicEarningsPerShareCalculationWeightedEarningsPerShareCalculationUsingEarningsPerShare

Earningspershare（EPS）isacommonlyusedphraseinthefinancialworld.Earningspersharerepresentsaportionofacompany'sprofitthatisallocatedtooneshareofstock.Therefore,ifyouweretomultiplytheEPSbythetotalnumberofsharesacompanyhas,you'dcalculatethecompany'snetincome.EPSisacalculationthatmanypeoplewhowatchthestockmarketpayattentionto.

Method1of3:

BasicEarningsPerShareCalculation

1.

1

Locatethecompany'snetearningornetincomefromthepreviousyear. Thisinformationcanbefoundonmostfinancialwebpages,oronthecompany'swebsite.Usingthecompany'snetearningsorincomeastheprimarynumberinthecalculationisthemostbasicwayofdeterminingEPS.

∙Forexample,sayyouwanttocalculatetheEPSofMicrosoftbasedonitsnetincome.AquickbrowseofMicrosoft'swebsitetellsyouthatin2012,thecompany'snetincomewasalmost$17billion.[1]

∙Becarefulnottomistakeacompany's quarterly netincomewiththeir annual netincome.Quarterlyprofitiscalculatedeverythreemonths,whereasannualprofitiscalculatedevery12months.Mistakingacompany'squarterlynetincomefortheirannualnetincomewillcauseyourcalculationtoberoughlyfourtimessmaller.

2

Figureouthowmanysharesareoutstanding. Howmanytotalsharesdoesacompanyhaveonthestockexchange?

Thisinformationcanbecollectedbyvisitingafinancialwebsiteandlocatingthecompany'sinformation.

∙Again,let'scontinuewiththeexampleofMicrosoft.Asofthetimeofwriting,Microsofthas8.33billionsharesoutstanding.[2]

3

Dividethenetincomebythenumberofsharesoutstanding. TakingMicrosoft'svitalsasourexample,we'ddivide$17billionby8.33billionandcomeawaywithabasicEPSof2.[3]

∙Takeanotherbasicexample.Let'ssayabocceballcompanyhasanetincomeof$4millionand575,000sharesoutstanding.Wedivide$4millionby575,000andcomeupwithanEPSof6.95.

Method2of3:

WeightedEarningsPerShareCalculation

1.

1

ModifythebasicEPScalculationslightlytoarriveattheweightedearningpersharecalculation. WeightedEPSisamoreaccuratecalculationbecauseittakesintoaccountanydividendsthatthecompanyissuestoshareholders.However,thisformulaismorecomplexthanthebasicearningspersharecalculationorthereportingterm,soitisnotusedquiteasofteneventhoughitismoreaccurate.

2.

2

Locatethecompany'sdividendsonpreferredstocks. Adividendisanamountofmoneypaidouttostockholders—oftenquarterly—fromthecompany'sprofit.

∙Forthesakeofexample,let'stakeAppleasthecompanywe'retryingtoarriveatacalculationfor.In2012,Appleannouncedthatitwouldpaya$2.5billiondividendquarterly,startinginQ3.[4] Thatamountstoroughly$5billionindividendsoverthecourseoftheyear.

3

Takethecompany'snetincomeandsubtractthedividendsonpreferredstocknumber. UsingAppleasanexample,aquicksearchrevealsthatin2012,Applerecorded$41.73billioninnetincome.[5] Subtract$5billionfrom41.73toarriveat$36.73billion.

4

Dividethedifferencebytheaveragenumberofoutstandingshares. Apple'snetincomeminustheirdividendin2012was$36.73billion.Dividethisamountbytheamountofsharesoutstanding,934.82million,toarriveataweightedEPSofroughly39.29.

Method3of3:

UsingEarningsPerShare

1.

1

UseEPSasabarometerforacompany'sprofitability. EPScluesinvestorsandpotentialinvestorsintoacompany'sprofitability.[6] AhigherEPSgenerallysignalsamorerobustcompany,profit-wise.Likemostnumbers,however,EPSshouldnotbelookedatinisolation.There'snofixedEPSnumberabovewhichacompany'sstockshouldbeboughtandbelowwhichitsstockshouldbesold.It'simportanttolookatacompany'sEPS inrelationto othercompanies.

2.

2

Knowthatmorethanothercalculations,EPSisprobablythesinglemostimportantfactorindrivingacompany'sstockprice.[7] Lookingatacompany'sEPSismorevaluablethanlookingattheirprofitbecauseEPSputsacompany'sprofitintoperspective.（Ahugecompanygenerating$1Mnetincomeisn'tveryimpressive;atinycompanygenerating$1Mnetincomeis.）EPSisalsointegralinevaluatingacompany'sPricetoEarningsratio,orP/E.

3.

3