There may be times when you visit the EPS tab and the Earnings tab and see different numbers.
For example: Amazon (AMZN) had an EPS of $1.90 in December of 2024. They also had an earnings estimate of $1.49 and an earnings reported of $1.86.
The question is, why is the EPS $1.90 on one page and $1.86 on another page?
The answer is there are 5 types of earnings per share.
5 types of earnings per share
As per this article from investopedia.com, here are the 5 types of earnings per share.
Read to the end to see which EPS we should care about the most.
1) Reported EPS or GAAP EPS
- What is it? GAAP stands for General Accepted Accounting Principles. This EPS is the most strict as is overseen by the SEC.
- Calculation: (Net Income – Preferred Dividends) / Weighted Average Common Shares Outstanding
2) Ongoing/Pro Forma EPS
- What is it? Pro Forma EPS typically excludes some expenses or income that were used in calculating reported earnings. For example, if a company sells a division, it could exclude the past expenses and revenues associated with that division.
- Calculation: (Acquirer’s Net Income + Target’s Net Income +/- “Incremental Adjustments”) / (Acquirer’s Shares Outstanding + New Shares Issued)
3) Carrying Value/Book Value
- What is it? Carrying value per share, more commonly referred to as the book value of equity per share (BVPS), measures the amount of company equity in each share. This measure focuses on the balance sheet and not much else, so it is a static representation of company performance. A company’s carrying value EPS is viewed mostly in a trend line that can show how effective management is at increasing shareholder equity over time.
- Calculation: (Shareholder Equity – Preferred Equity) / Weighted Average of Common Shares Outstanding
4) Retained EPS
- What is it? That figure is the amount of profit that is kept by the company rather than being shared with stockholders in the form of dividends. In short, retained earnings are the accumulated profit that the company keeps.
- Calculation: Beginning Period Retained Earnings + Net Income – Cash Dividends – Stock Dividends
5) Cash EPS
- What is it? Cash EPS is operating cash flow divided by diluted shares outstanding. Cash EPS is important because it is a more pure number. That is, it represents real cash earned and it cannot be manipulated as easily as net income.
- Calculation: Operating Cash Flow / Diluted Weighted Average Shares Outstanding
Should we care which EPS is used?
Short answer: No
No matter what EPS equation is used, we don’t care.
What we do care about is the EPS growth rate between quarters.
Here are examples.
Stock 1:
- EPS in Q1: $1.50
- EPS in Q2: $2.00
Stock 2:
- EPS in Q1: $1.50
- ES in Q2: $3.00
As you can see, Stock 1 is growing by 33% and Stock 2 is growing by 100%.
When we look for investments, we want to find companies with a fast-growing EPS.
The faster a company is increasing EPS, the faster it’s increasing its profits and investors should look for highly profitable companies! If profits are increasing, that means there is a higher probability the share price will increase.
Basic vs Diluted EPS
In some cases on an Income Statement, you may see Basic EPS and Diluted EPS.
What is the difference?
Basic EPS is the company’s net income divided by its outstanding shares. Diluted EPS is the same calculation, but it also includes potential shares that could become outstanding including convertible securities, employee stock options, and secondary offerings. Diluted EPS is always less than or equal to basic EPS.
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