Earnings per share or EPS meaning

Earnings per share (EPS) expresses the amount of a company’s profit attributable to each ordinary share and is widely used in results announcements, prospectuses, takeovers and share buybacks. It is an accounting, not statutory, measure defined by IAS 33 Earnings per Share. Under IAS 33, basic EPS is calculated by dividing profit or loss attributable to ordinary equity holders by the weighted average number of ordinary shares in issue during the period. Diluted EPS adjusts for potential ordinary shares (for example, options, warrants and convertibles) that could dilute existing holders. In the UK, companies applying UK‑adopted international accounting standards (including listed and AIM companies) must present EPS in accordance with IAS 33. In Ireland, the same requirement applies under EU‑adopted IFRS. Under current UK GAAP (FRS 102), EPS is not mandated, although entities may present it voluntarily. The former UK standard FRS 22 (issued to converge with IAS 33) has been withdrawn. EPS is a key metric in assessing performance, valuation and financing decisions. In a share buyback, reducing the number of shares in issue can enhance EPS; a higher EPS, all else equal, lowers the price/earnings (P/E) ratio (share price divided by EPS), which may support a higher share price. Usage...