Adjusted Earnings Per Share
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- เผยแพร่เมื่อ 14 ต.ค. 2024
- Adjusted Earnings Per Share. How do you calculate adjusted EPS, and what are some examples of adjusted EPS from real-life companies?
To understand Adjusted Earnings Per Share, let’s first review the definition of “regular” Earnings Per Share. EPS is simply Net Income divided by the number of outstanding shares.
Examples of companies using some form of Adjusted Earnings Per Share. I have four examples that I want to share in this video: American Express which uses Adjusted EPS, Boeing which uses Core EPS, Intel which uses Non-GAAP EPS, and Procter & Gamble which uses Core EPS. Guess what, the way Boeing defines Core EPS is different from the way Procter & Gamble defines Core EPS. If you review the annual reports of other companies, you might also come across terms such as Operational EPS. All of these are some form of Adjusted EPS: you take GAAP EPS and adjust it for certain items to get to Adjusted EPS. What the items are that are adjusted for, is different by company! Let’s go through the examples to illustrate this.
So what is important to understand about Adjusted Earnings Per Share? Adjusted EPS is a term that has many variations, it can for example also be called Core EPS, non-GAAP EPS, or Operational EPS. The formula for Adjusted EPS is: you take GAAP EPS and adjust it for certain items to get to Adjusted EPS. The adjustment can relate to one-time tax charges, pension gains or losses, amortization of intangibles, restructuring, and many other items. Adjusted EPS can be higher or lower than GAAP EPS, but as we saw in the examples in this video it is very often higher.
Philip de Vroe (The Finance Storyteller) aims to make strategy, #finance and leadership enjoyable and easier to understand. Learn the #business and accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investing decisions. Philip delivers #financetraining in various formats: TH-cam videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
i lost 1200 dollar today cuz i dont know gaap and non gaap diffrence now i know what this means thanks a lot
Yeah, mind the gap between GAAP and non-GAAP!!! More examples in this 10-minute discussion of what to watch out for: th-cam.com/video/ewzlgnGtfmg/w-d-xo.html
@@TheFinanceStoryteller hey bro i just want to ask question for you
today im thinking to buy (AON) stock
q4 earnings increased %10 from last quarter also revanues increased margin increased but this stock fall down 2.5 % today what im making wrong ???
companies revaling new quarter reports with last years quarter report ,i should look to compare last year OR last quarter report ??
i mean if q4 revaled i should look q3 2022 or q3 2021 to compare ??
thanks...
There can be many reasons why a stock goes down instead of up on a specific day:
Overall stock market direction on that day (political events, interest rates, oil prices, etc)
Other aspects of the financial performance: maybe revenue and margins were good, but cash flow might have been below expectations
Performance versus expectations - maybe stock market analysts and investor had expected even more
Performance against competitors - maybe they did even better than the company you are looking at
In terms of comparisons, you tend to compare against the same period in the previous year, so Q4 2022 vs Q4 2021, Q3 2022 vs Q3 2021.
many thanks - really simple and to the point; the examples helped greatly
You're welcome, Leighan! Thank you for the feedback, and welcome to my channel. :-)
Worth mentioning is that some of the items used for earnings adjustment are discretionary, i.e., restructuring charges. Their use and timing of use is at the discretion of management, and thus they can be used to "smooth" the change in non-gaap/adjusted/core earnings from one year to the next.
Yep, sad but true! I covered some of those line items in my "GAAP vs non-GAAP" video a few years ago: th-cam.com/video/ewzlgnGtfmg/w-d-xo.html
Thank you for the video, it is really helpful to understand financial terminology just one cuestion: is this -Earning Per Share- what the company gives to the shareholders as payment??
Hello Carlos. No, EPS is Net Income divided by number of share. What the company pays out to shareholders is dividend: th-cam.com/video/Wy7R-Gqfb6c/w-d-xo.html
excellent explanation
Thank you, Ernesto!
How investor gets benefited by opting reported eps over adjusted or adjusted eps over reported??
Hello Prasanna! That is an excellent question. It's all a part of the quest for the most "meaningful" metric. Accounting authorities like FASB and IASB would like every company to stick to the same (unadjusted) definitions for comparability, while many companies believe they (or their industry) are truly unique and should be measured in a different way (adjusted EPS, adjusted EBITDA, etc.). As an investor, you try to figure out what is the "real trend". And even when you focus on diluted EPS without adjustments, the question is whether any growth in EPS comes from the numerator or denominator in the calculation. See my analysis of Apple Inc EPS growth: th-cam.com/video/TRY_mjggMQY/w-d-xo.html And for the broader context, GAAP vs non-GAAP th-cam.com/video/ewzlgnGtfmg/w-d-xo.html or my recent webinar (livestream replay) of analyzing Uber Technologies Inc adjusted EBITDA th-cam.com/video/87Ag_hhseOA/w-d-xo.html
@@TheFinanceStoryteller thank you very much sir!!!
how come adjusted eps is never lower than gaap ???????????????????????????????????????????????
I wouldn't say adjusted EPS is absolutely never lower than GAAP EPS, but the tendency is for companies to be eager to exclude "negative news" (unusual expense charges) in their adjusted EPS calculation. If expenses go down, the profit goes up and adjusted EPS will be higher than GAAP EPS. For more information, watch my GAAP vs non-GAAP video: th-cam.com/video/ewzlgnGtfmg/w-d-xo.html