The term earnings per share (EPS) represents the portion of a company's earnings, net of taxes and preferred stock dividends, that is allocated to each share of common stock.
For a Group of companies,it is a consolidated net income after tax after deducting non-controlling interest and preference share dividend divided by number of ordinary shares ranking for dividend.
The formular goes thus;
For a single entity: Net income/Number of shares ranking for dividend
For a Group: Profit after tax -preference share dividend-Non-contolling interest/Number of ordinary shares ranking for dividend.
The figure can be calculated simply by dividing net income earned in a given reporting period (usually quarterly or annually) by the total number of shares outstanding during the same term. Because the number of shares outstanding can fluctuate, a weighted average is typically used.
How it works/Example:
Take for example, Company XYZ reported net income of N4 million. During the same time frame, the company had a total of 10 million shares outstanding. In this particular case, the company's earnings per share (or EPS) would be N0.40, calculated as follows:
N4 million / 10 million shares = N0.40k
Take for example 2,
Zplc with an issued share capital 7m ordinary shares of N1 each as at 1st Jan 2015 issued additional 5m shares for cash on 30th Sep 2015. The earnings for the period was N6m. The EPS for 2015 is N72.73k. As calculated below;
EPS= PAT-preference share dividend/No of ordinary shares ranking for dividend
Where Number of Ordinary shares ranking for dividend is given below;
1/1/2015-30/9/2015 =9/12*7m shares= 5,250,000 shares
1/10/2015-31/12/2015=3/12*12m shares= 3,000,000shares
8,250,000shares
EPS= N6,000,000/8,250,000shares
= N72.73k
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