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02/08/2014 10:25 a.m.
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Earnings per share (EPS) - Buy and Hold Yield Investments Strategy


Earnings per share (EPS) is derived by dividing the Full Year Profit by the number of shares on issue.


Formula: EPS = full year profit ÷ shares on issue

Objective:


Analysing EPS can highlight a company whose EPS growth rate is consistently faster than their business peers (i.e. other companies that provide the same goods and/or services). You are looking to see if the company has grown the profit for each listed share faster than similar companies. Analysts use forecasted rather than historic EPS to determine future prospects.

You can access peer analysis and forecasted EPS from the Reuters website - this site covers all stock markets and most shares traded through ANZ Securities. You can view the Estimates page and the Ratios page for your chosen stock(s).

Step 1: Find EPS growth rate figures

 
Estimated EPS

On this page you can view the consensus opinion of stock analysts. It will show the predicted mean, high and low of the earnings per share by each analyst. Under “Consensus Estimates Trend” you will see how those predictions have changed. Under “Estimates Revisions Summary” you will see how often and in which way those predictions have been revised. Some shares have a “Historical Surprises” summary if the analysts were unable to accurately predict the result.

Step 2: Compare against industry peers

 
Ratio Comparison

On the "Ratios" page under “Growth Rates” you can view the 5 year historical growth rate for the EPS. You can also compare it to industry (e.g. Integrated Telecommunications) and sector (e.g. Telecommunications) of the relevant company to see how the company performs compared to the peer mean.

To establish which companies you should be comparing in an industry, we recommend that you view the NZX Market Indices list on the ANZ Securities website.