Earnings per share (EPS) shows the amount of annual profit per a single share. It is important indicator used during investment decision-making.
* Number of share is mostly the average for the period weighted by the number of days.
EAT (PAT) is often reduced by dividends on preferred shares.
Some entities preparing financial statements in accordance with IFRS are required by IAS 33 (Earnings Per Share) to state as part of the income statement:
- basic earnings per share (EPS)
- diluted earnings per share (EPS) - which adjusts both the numerator and denominator for the effects of contracts (e.g. securities convertible into shares), which could in the future dilute EPS
The disadvantage of the indicator
is in the use of profit that can be manipulated.
The appropriate comparison
is with competitors EPS or other comparatives.