Earnings per share (EPS)
Learn what earnings per share (EPS) means, how to calculate it and how to use it to compare company profits.
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- Earnings per share (EPS) shows how much net profit a company earns for each ordinary share outstanding
- You calculate it by subtracting preference dividends from net profit, then dividing by the weighted average number of ordinary shares
- In Indonesia, the Statement of Financial Accounting Standards (PSAK) 233 Laba per Saham sets the rules, and listed companies report both basic and diluted EPS
- EPS tells you most when you read it alongside the price-to-earnings (P/E) ratio, dividend payouts and its trend over several years
What is earnings per share?
Earnings per share (EPS) is the net profit a company earns for each ordinary share outstanding. In Indonesian, it’s called laba per saham.
Picture a company’s yearly profit as a nasi tumpeng shared among guests, where each guest holds one share. EPS tells you how big each portion is. If more guests arrive and the tumpeng stays the same size, everyone’s portion shrinks.
Investors use EPS to compare how much profit different companies generate per share, especially within one industry. You’ll find it in a listed company’s financial statements, and it feeds into other measures, such as the P/E ratio.
How to calculate earnings per share
You calculate basic EPS by dividing the profit that belongs to ordinary equity holders by the average number of ordinary shares in issue. Follow these steps to work it out:
- Find the company’s net profit for the period on its statement of profit or loss
- Subtract any dividends owed to preference shareholders for the same period
- Work out the weighted average number of ordinary shares outstanding, adjusting for shares issued or bought back during the period
- Divide the adjusted profit by the weighted average number of shares
Put together, the EPS formula looks like this:
EPS = (net profit – preference dividends) / weighted average number of ordinary shares outstanding
In this formula, net profit is what remains after you subtract all operating expenses, interest and taxes from gross profit. Preference dividends come off because EPS measures only the profit available to ordinary shareholders. The weighted average counts each share for the portion of the period it was on issue.
Example EPS calculation
Say a limited liability company (perseroan terbatas, or PT) reports net profit of Rp2,000,000,000 for the year. It owes Rp200,000,000 in preference dividends, and its weighted average number of ordinary shares outstanding is 500,000.
EPS = (Rp2,000,000,000 – Rp200,000,000) / 500,000 = Rp3,600 per share
The company earned Rp3,600 for every ordinary share. Set that figure against similar businesses to see which one produces more profit per share.
Basic EPS vs diluted EPS
Basic EPS divides profit by the ordinary shares already on issue, while diluted EPS also counts shares that could be created later. In Indonesia, both sit under PSAK 233 Laba per Saham. The Indonesian Institute of Accountants (Ikatan Akuntan Indonesia, or IAI) renumbered it from PSAK 56 effective 1 January 2024.
The renumbering left the substance of the standard unchanged, and PSAK 233 adopts International Accounting Standard (IAS) 33 Earnings per Share. Under IAS 33, entities with publicly traded ordinary shares must present basic and diluted EPS with equal prominence.
Dilution comes from instruments that could turn into ordinary shares, such as share options or convertible bonds. The diluted EPS formula adds those potential shares to the denominator:
Diluted EPS = (net profit – preference dividends) / (weighted average ordinary shares + dilutive potential ordinary shares)
Instruments that would push EPS up, known as anti-dilutive instruments, are left out of the calculation. That means diluted EPS can equal basic EPS, but it won’t be higher.
Types of EPS
Beyond basic and diluted EPS, you’ll see other versions in annual reports and analyst commentary. Each one answers a different question about a company’s earnings.
Adjusted EPS
Adjusted EPS removes one-off items that don’t reflect ongoing operations, such as restructuring costs or a gain from selling a business unit. It gives you a clearer view of whether the core business is earning more or less over time.
From 1 January 2027, PSAK 118, which adopts International Financial Reporting Standard (IFRS) 18, takes effect in Indonesia. It narrows which profit figures companies can use as numerators for additional per-share amounts, such as an adjusted EPS figure. The core EPS formula stays the same.
Trailing EPS vs forward EPS
Trailing EPS uses actual earnings from the most recent reporting period, usually the past 12 months. Because it’s based on reported results, it shows what has already happened.
Forward EPS estimates future earnings, using analyst projections or company guidance. It helps you understand what the market expects, though it relies on forecasts that can change.
Factors that affect EPS
EPS moves whenever either side of the formula changes. Watch these four drivers when you review yearly results.
- Higher net profit raises EPS, whether it comes from growing revenue or tighter cost control
- More shares outstanding lower EPS, so new share issues dilute it and buybacks lift it
- Rising operating costs cut net profit and pull EPS down
- Larger preference dividends reduce the profit left for ordinary shareholders
How EPS is used
EPS helps you compare profit per share between companies and track one company’s performance over time. It works best when the businesses operate in the same sector.
It’s also the denominator in the price-to-earnings (P/E) ratio: P/E ratio = share price / EPS. The result shows how much investors pay for each rupiah of earnings, which helps you judge whether a share price looks reasonable.
Tracking EPS across several years shows whether profit per share is growing, which is one way of measuring profitability. If EPS drops, check whether net profit fell or the share count rose.
EPS and dividends
EPS shows how much profit each ordinary share earned, and dividends are the part of that profit a company pays out. In Indonesia, company law also limits when a PT can pay them.
Under Law No. 40 of 2007 on Limited Liability Companies (UU No. 40/2007), the general meeting of shareholders (RUPS) decides how a PT uses its net profit. The company sets aside a mandatory reserve first. It can only pay dividends when it has positive retained earnings.
The dividend payout ratio shows how much of EPS reaches shareholders as cash: dividend payout ratio = dividends per share / EPS. If a company earns Rp400 per share and pays Rp100 in dividends per share, its payout ratio is 25%.
A low ratio means the company keeps most of its profit for growth or paying down debt. A high ratio returns more to shareholders but leaves less to reinvest, so compare payout ratios with EPS trends to judge whether dividends can continue.
What is a good EPS?
A good EPS is one that compares well with similar companies and grows steadily over time. The right figure depends on the industry, the company’s size and its stage of growth.
Profit margins and capital structures vary between sectors, so measure EPS against direct peers. A lower EPS that rises each year can be a stronger sign than a high EPS that’s flat or falling.
Younger, fast-growing companies may report lower EPS because they reinvest heavily, while established companies tend to show steadier figures. Read EPS alongside other profitability ratios for a fuller view.
Limitations of EPS
EPS is a handy starting point, but it leaves out parts of the picture. Keep these gaps in mind when you analyse a company.
- EPS leaves out debt levels, so two companies with the same EPS can carry very different risk
- It skips asset efficiency, so a company can post strong EPS while tying up large amounts of capital
- Share buybacks raise EPS mechanically by cutting the number of shares outstanding, even when net profit stays the same
- Accounting choices, such as depreciation methods and expense timing, change net profit and make comparisons less reliable
- EPS ignores the share price, so you need the P/E ratio to judge whether a share is fairly valued
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Understanding EPS is easier when your own numbers are accurate and up to date. Xero brings your accounting data into easy-to-read financial reports, so you can see profit and expenses in real time.
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FAQs on earnings per share
Here are answers to common questions about earnings per share.
Is EPS the same as a dividend?
EPS measures the profit each ordinary share earned, while a dividend is the cash a company chooses to pay out. A company with positive EPS can still keep all its profit and pay no dividend that year.
Does a higher EPS mean a higher share price?
A higher EPS can support the share price, but prices also reflect what investors expected. If EPS rises but misses analyst forecasts, the share price can still fall.
Can EPS be negative?
Yes, EPS turns negative when a company reports a net loss for the period. Companies then report it as a loss per share, using the same basic and diluted method.
Do private companies need to report EPS?
IAS 33 applies to companies whose ordinary shares are publicly traded, so most private companies aren’t required to report EPS. If a non-public company chooses to present EPS, it must follow the standard.
Where can you find a company’s EPS?
According to the Institute of Chartered Accountants in England and Wales (ICAEW), listed companies show basic and diluted EPS on the statement of profit or loss. Check several years of annual reports to see how the figure has moved.
Related terms
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.