Earnings per Share (EPS)

Formula

Earnings per Share (EPS)

=Net Profit After Tax − Preference Dividends / Weighted Average Number of Ordinary Shares

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Where:

Net Profit After Tax (NPAT) = Profit attributable to the company after tax

Preference Dividends = Deducted because EPS focuses on ordinary shareholders

Weighted Average Number of Ordinary Shares = Adjusted for shares issued or bought back during the year or Number of shares outstanding

Explanation

Earnings per Share measures the profit earned for each ordinary share.

It shows how much profit is available to ordinary shareholders on a per-share basis and is one of the most widely used indicators of company performance.

A higher EPS generally indicates:

• Strong profitability
• Better returns to shareholders
• Higher potential for dividends and share price growth

A lower or declining EPS may indicate:

• Falling profits
• Dilution from new share issues
• Poor operating performance

EPS is commonly used together with Price–Earnings (P/E) Ratio to evaluate shares.

Satisfactory Level

There is no fixed “good” EPS value because EPS depends on:

• Company size
• Number of shares issued
• Industry characteristics

EPS is considered satisfactory when it:

• Is positive and growing over time
• Is higher than competitors in the same industry
• Supports stable or increasing dividends

Trend analysis is more important than a single year’s EPS.

Industry Norms (General Guidance)

EPS values vary widely and are not directly comparable across industries.

Industry	Typical EPS Trend
Manufacturing	Moderate, stable growth
Retail	Lower EPS but consistent
Banking & Finance	Stable and predictable
Technology	High growth, volatile
Utilities	Lower but steady EPS

⚠️ Always compare EPS within the same industry and company size.

Example

Modern More Berhad

Net Profit After Tax: RM500,000

Preference Dividends: RM50,000

Ordinary Shares Outstanding: 1,000,000 shares

Step 1: Profit attributable to ordinary shareholders

500,000−50,000=RM450,000

Step 2: Calculate EPS

EPS= 450,000 / 1,000,000 = RM0.45

Interpretation:

The company earns 45 sen per ordinary share, meaning each share is entitled to RM0.45 of profit for the year.

Summary

• EPS focuses on ordinary shareholders only
• Always deduct preference dividends
• Use weighted average shares if shares change during the year
• EPS alone is not enough—combine with P/E, ROE, and dividend ratios