Defining EPS, Different Kinds and Meanings

In a nutshell, EPS or earnings per share is net income Forex Broker List divided by the number of the outstanding shares.  On the other hand, both the numerator and the denominator can change depending on how someone defines the words “earnings” and “shares outstanding.” There are numerous ways to define earnings.

As a general rule, EPS can be whatever the business wants it to be, depending on the assumptions and accounting policies. Corporate spin doctors direct media attention on the number that the company wants in the news, which may or may not be the EPS reported in documents filed with the Securities and Exchange Commission (SEC).

Shares Outstanding

Shares outstanding Finance Brokerage Stocks can be classified as either primary or standard (primary EPS), or fully diluted (diluted EPS). Primary EPS is calculated using the number of shares that have been issued and are held by investors. These are shares that are currently in the market and can be traded.

Reported EPS (or GAAP EPS)

We can define reported EPS as the number derived from generally accepted accounting principles (GAAP), which are reported in the SEC filings. The company derives the earnings according to the accounting guidelines used. A company’s reported earnings can be distorted by GAAP.

Ongoing/Pro Forma EPS

Ongoing EPS is calculated based on normalized, or ongoing, net income and excludes anything that is an unusual one-time event. The idea is to find the stream of earnings from core operations, which can be used to forecast future EPS. This can mean excluding a huge one-time gain from the sale of equipment, as well as an unusual expense. Attempts to determine an EPS using this methodology is also known as “pro forma” EPS.

Carrying Value/Book Value EPS

Carrying value per share, or more commonly referred to as book value of equity per share, measures the amount of company equity found in each share. Focusing on the balance sheet and not much on anything else, it is considered a very static representation of company performance. Nonetheless, the general trend of carrying BVPS can tell the investor a ton of things about how effective the management is when it comes to increasing shareholder equity. BVSP should tell the investor how much his shares would be worth if the company had to be liquidated and all of its assets sold. It might be important to note that Benjamin Graham and Warren Buffet consider BVPS to be one of the most important company measures.

Retained EPS

Calculating retained earnings per share involves taking net earnings, adding that any currently held retained earnings, less the amount of dividends paid out and dividing the remaining amount by the number of outstanding shares. Retained earnings is the amount of profit that is kept by the company instead of that being sent to stockholders in the form of dividends. The amount of any retained earnings not spent on a given period is added to the net earnings to the following period to make the retained earnings calculation for that period.