Shown for the previous eight quarters, earnings per share is the portion of a company's profit allocated to each outstanding share. As of January 1998, all EPS numbers collected by Morningstar are Diluted EPS (as per FASB 128). Diluted EPS is calculated by dividing net income (plus convertible-preferred dividends and after-tax amount of interest recognized in the period, associated with any convertible debt) by the sum of the weighted-average shares outstanding, and any additional common shares that would have been outstanding if the dilutive potential common shares had been issued. In the past, Morningstar has used Primary EPS on a consistent basis.
Benefit
Quarterly earnings per share numbers are more useful than annual numbers for evaluating a company’s performance in the short term. Also, per-share numbers are more useful than raw net income for cases where a company has issued lots of new shares.
Origin
This figure is found at the bottom of the company’s income statement.
For the Pros
We also show percentage changes between each of the latest four quarters and the corresponding year-earlier quarters. (Because of seasonal fluctuations in business, it's usually best to compare a company's quarterly results with the results from the corresponding quarter of the previous year.) The % Change Q1/Q2 field, for example, represents the percentage change in EPS between the most recently ended fiscal quarter and the corresponding quarter of the prior fiscal year.
Use the following formula to focus on changes from one quarter to the next, instead of looking at changes from the year-ago number:
(( EPS Quarter 1 – EPS Quarter 2) / EPS Quarter 2) x 100