📈 Capital Market Chronicles – Episode 129: UNDERSTANDING EARNINGS PER SHARE (Part II)
EPS UNMASKED! “Same EPS, Different Costumes” – A Financial Masquerade Party 🎭
If Part I was about EPS stretching its limbs and telling you, “Here’s how much each share earns,” Part II is where it hits the runway — in three different avatars. Let’s meet our EPS impersonators, shall we?
👵 Trailing EPS – “The Historian”
This one is the senior citizen in the EPS family. 🧓
She walks in with dusty ledgers from the previous year, wagging her finger and saying,
“Back in my day, this company earned ₹4.25 per share… and we were happy!”
Used by cautious investors who love facts, not feelings. If you ever said “past performance is no guarantee, but it’s something,” Trailing EPS is your jam.
👩 Current EPS – “The Realist”
She’s the present-day working woman balancing quarterly earnings and projections like a pro.
A little bit of actuals, a little bit of guesswork – and a whole lot of attitude. 🧾
“Sure, Q1 and Q2 were strong. Now let’s hope Q3 doesn’t trip over its own balance sheet.”
Current EPS is the corporate version of living in the moment — practical, slightly nervous, and addicted to earnings calls.
🔮 Forward EPS – “The Astrologer”
Enter the fortune-teller! Robed in analyst reports, surrounded by charts, and whispering predictions about the future. 🔮
“If Jupiter aligns with the right inventory cycle and sales go up 20%, EPS will rise like a phoenix!”
Forward EPS tells you what might happen if everything goes according to plan. And if it doesn’t? Well... there’s always next quarter.
🧮 But Wait! EPS Isn't Just About Earnings – Let’s Talk Shares
Because when it comes to EPS, the number of shares matters as much as the profits!
🥚 Basic Shares – “The Eggs Already Hatched”
These are the shares that are currently out in the wild – the ones investors are already trading.
They’re used in calculating Basic EPS, the default measure your friendly neighborhood finance website shows you.
Formula:
🧠 Basic EPS = Net Income / Basic Shares
Simple. Neat. No surprises.
🐣 Fully Diluted Shares – “The Eggs That Could Hatch”
Imagine every convertible bond, stock option, and warrant turning into a share overnight.
Now that’s a crowded shareholder meeting. 😳
Fully diluted shares include:
-
🎯 Stock Options
-
🎟️ Warrants
-
👑 Convertible Preferred Stock
-
🏦 Convertible Bonds
And with them comes: Fully Diluted EPS, the party-pooper version of EPS that assumes everyone who could dilute the earnings... will.
Formula:
🧠 Fully Diluted EPS = Net Income / Fully Diluted Shares
This one’s brutally honest. It tells investors:
“If every possible share showed up to claim a slice of the earnings pie, this is how thin your slice would be.”
🎯 Why This Matters
So what’s the big deal with all these versions of EPS?
Simple: investors hate surprises.
Basic EPS might look lovely, but when you realize it’s based on a smaller share count than what might exist soon, it’s like realizing the “unlimited buffet” only includes salad. 🥗😐
By looking at Trailing, Current, Forward, Basic, and Fully Diluted EPS, you’re not just seeing a company’s performance — you're seeing its potential, its risks, and its dividend-paying character flaw
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