Introduction To Stock Trading: How To Correctly Understand "Earnings Per Share"

In the numerous financial data disclosed by listed companies, "earnings per share" is a very critical data.

However, due to the change of new accounting standards, the "earnings per share" of listed companies also changed greatly.

Then, how to correctly understand the meaning of the "earnings per share" index under the new accounting standards?

Change

Before the promulgation of the new accounting standards, there are two ways to calculate earnings per share: the full spread method and the weighted average method.

before

Under the new accounting standards, there has been a major change in the calculation method of earnings per share. In the periodic report, EPS will not appear in the periodic report, which is familiar to investors.

Relative to the full diluted earnings per share, the basic earnings per share further considered the time factor of the share change and its contribution to the annual net profit.

Calculate

1. basic earnings per share

The calculation of basic earnings per share is divided into the weighted average number of ordinary shares issued in the current period in accordance with the net profit attributable to common shareholders.

Take a company's basic earnings per share calculation as an example:

The company's net profit attributable to ordinary shareholders is 250 million yuan.

At the end of 2006, the share capital was 80 million shares, and in February 8th, it was sent to 10 of all shareholders by 10 on the basis of the total share capital of 2006. The total share capital was 160 million shares.

In November 29th, 60 million shares of new shares were reissued.

(1) calculate the company's basic earnings per share in accordance with the new accounting standards:

Basic earnings per share =25000 * (8000+8000+6000 x 1/12) =1.52 yuan / share

If the above cases are calculated in accordance with the overall dilution method of the old accounting standards, the earnings per share will be 25000 yuan (8000+8000+6000) =1.14 yuan / share.

From the above case data, under the condition that the net profit index has not changed, the basic earnings per share calculated by the new accounting standards is 33% higher than the earnings per share calculated by the old accounting standards.

2. diluted earnings per share

In practice, listed companies often have some potential tools that can be converted into equity of listed companies, such as convertible bonds, subscription options or stock options. These tools may be converted into common stocks at some point in the future, thereby reducing earnings per share of listed companies.

Diluted earnings per share, that is, assuming that the company's existing shares of listed companies may be converted into shares of listed companies are converted into common shares in the current period after the calculation of earnings per share.

Compared with the basic earnings per share, diluted earnings per share fully considered the dilution effect of potential common stock on earnings per share to reflect the capital of the company under the future capital structure.

Use

At present, the annual report is under way.

Due to the difference between the old and new accounting standards, the basic earnings per share of some listed companies may be larger than that in 2006.

Experts believe that when studying the basic earnings per share index of listed companies, we should note that since January 1st, the earnings per share index of listed companies is calculated according to the weighted average method, and the result may be greater than the earnings per share calculated by investors in the full dilution method.

Therefore, we should not simply compare the basic earnings per share and the earnings per share disclosed in the previous annual reports.

Investors can find the comparative data of basic earnings per year based on the same caliber in the "main financial indicators" part of the annual report.

In addition, when the price earnings ratio is used to estimate the stock value of listed companies by relative valuation method, investors should pay attention to the factors caused by the new accounting standards.

When making investment decisions, ordinary investors usually consider earnings per share only.

Experts suggest that when using this indicator, investors must combine other financial information, non-financial information and other related elements, such as the company's