Earnings per share (EPS) is one of the most widely cited financial metrics on the Singapore Exchange (SGX). It represents the portion of a company's profit allocated to each outstanding share of common stock. For investors, EPS serves as a quick gauge of profitability and is a key input for valuation ratios such as the price-to-earnings (P/E) ratio. Understanding EPS, including its variations, limitations, and how it can be manipulated, is essential for anyone reading SGX announcements or analysing annual reports.

This article explains the mechanics of EPS, the differences between basic and diluted EPS, how to interpret EPS trends, and what Singapore retail investors should watch out for when using EPS in their investment decisions. We will also discuss how EPS relates to dividends, share buybacks, and corporate disclosures.

What Is Earnings Per Share?

EPS is calculated by dividing a company's net profit (or net income) by the number of outstanding shares. The formula is straightforward:

Basic EPS = (Net Income, Preferred Dividends) / Weighted Average Number of Ordinary Shares Outstanding

Net income is the profit after all expenses, taxes, and interest have been deducted. Preferred dividends are subtracted because preferred shareholders have a higher claim on earnings and must be paid before ordinary shareholders receive anything. The weighted average number of shares accounts for any changes in share count during the period, such as new issuances or buybacks.

For example, if a company listed on the SGX reports a net profit of S$50 million for the financial year and has 100 million ordinary shares outstanding on a weighted average basis, its basic EPS would be S$0.50 per share. If the company also paid S$2 million in preferred dividends, the EPS would be (S$50 million, S$2 million) / 100 million = S$0.48 per share.

EPS is typically reported in the income statement of a company's financial reports, including interim reports and annual reports. It is also a mandatory disclosure in SGX announcements for companies that report under Singapore Financial Reporting Standards (SFRS).

Basic vs. Diluted EPS

Companies are required to report both basic and diluted EPS under SFRS. The difference lies in the number of shares used in the denominator.

Basic EPS

Basic EPS uses the weighted average number of ordinary shares that were actually outstanding during the period. It does not consider any potential shares that could be issued in the future. This is the simplest measure and is often the one quoted in headlines.

Diluted EPS

Diluted EPS adjusts the denominator to include all potential ordinary shares that could be converted into shares. These include:

  • Convertible bonds or debentures
  • Share options granted to employees or directors
  • Warrants
  • Convertible preference shares

The diluted EPS calculation uses the