Earnings Per Share

Total earnings divided by the number of shares in issue. EPS is a key ratio used in share valuations. It shows how much of the company's profits, after tax, each shareholder owns. For example, if a company makes a post-tax profit of £1.2 million and there are 20 million shares in issue, the EPS would be £0.6, or 60 pence. Earnings are normally shown for the previous year, based on actual data, but can be estimated for the current year or a future year. What is theoretically an easy calculation becomes complicated because the rules on what constitute earnings are fuzzy, especially when it comes to 'extraordinary' items. Various Financial Reporting Standards (FRS) have tried to regularise treatment of one-offs, with limited success. Often when newspapers report EPS they use 'adjusted' EPS (also known as 'headline earnings') which strip out all profits/losses attributable to non-core activities.