The determination of earnings per share (SSAPs 3, 6, 8 and 5)

Abstract

Earnings per share (eps) is found by dividing profit attributable to the ordinary shareholders by the number of ordinary shares in issue. As an absolute, however, it has no meaning or relevance. If we are told that company A has an eps of 6p whereas company B has an eps of 25p, we are unable to compare the performance of the two because we know nothing about their relative size or, more specifically, about the number or value of shares in issue. For the same reasons the quoted share price of the two companies provides no basis for comparison of the stock market’s perceptions of either.