Earnings per share (EPS)
Learn what earnings per share means, how to calculate it and how to read EPS in Malaysian company reports.
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- Earnings per share (EPS) shows how much profit a company earns for each ordinary share. It lets you compare profitability between companies of different sizes.
- To calculate EPS, subtract preference dividends from profit attributable to ordinary shareholders, then divide by the weighted average number of ordinary shares.
- Diluted EPS also counts shares that options, warrants and convertibles could create, so it gives a more conservative figure than basic EPS.
- Malaysian listed companies report basic and diluted EPS under Malaysian Financial Reporting Standard (MFRS) 133, the local equivalent of IAS 33.
What is earnings per share?
Earnings per share (EPS) is the amount of profit a company earns for each ordinary share. It tells you how much of the company’s profit belongs to each unit of ownership.
Think of it like splitting a restaurant bill: the total profit is the bill, and each share is one diner’s portion. Because EPS works per share, investors can compare a small company with a large one on a like-for-like basis.
As a small business owner, you’ll come across EPS when you read a listed supplier’s or competitor’s annual report. It also helps you make sense of the financial statements investors will expect if you plan to raise capital.
How to calculate earnings per share
You calculate EPS by dividing profit attributable to ordinary shareholders, less preference dividends, by the weighted average number of ordinary shares. The profit figure comes from the company’s profit and loss statement.
EPS formula
EPS = (Profit attributable to ordinary shareholders – Preference dividends) ÷ Weighted average number of ordinary shares
Follow these four steps to work it out:
- Find the profit attributable to ordinary shareholders, which is the company’s net profit after tax for the period
- Subtract any preference dividends, since preference shareholders are paid before ordinary shareholders
- Work out the weighted average number of ordinary shares, adjusting for shares issued or bought back during the period
- Divide the result from step 2 by the weighted average from step 3
The weighted average reflects how long each share was on issue. Say a company had 400,000 shares all year and issued 200,000 more halfway through.
The new shares count for half the year, so they add 100,000 to the average. That gives a weighted average of 400,000 + 100,000 = 500,000 shares.
Example EPS calculation
Suppose a company’s profit attributable to ordinary shareholders is RM2,000,000 for the year. It pays RM200,000 in preference dividends and has a weighted average of 500,000 ordinary shares.
EPS = (RM2,000,000 – RM200,000) ÷ 500,000 = RM3.60
So the company earned RM3.60, or 360 sen, for each ordinary share.
Basic EPS vs diluted EPS
Companies report two versions of EPS: basic and diluted. The difference comes down to which shares go into the denominator.
Basic EPS uses only the ordinary shares on issue during the period. Diluted EPS also counts potential ordinary shares, which could become ordinary shares later. Potential ordinary shares include:
- share options granted to employees
- warrants
- convertible bonds
- convertible preference shares
Diluted EPS spreads profit across more shares, so it’s usually equal to or lower than basic EPS. It shows you what each share would earn if every option and convertible became an ordinary share.
Diluted EPS only includes potential shares that would lower EPS. Under International Accounting Standard (IAS) 33, shares that would increase EPS or reduce loss per share are anti-dilutive. The IAS Plus summary from Deloitte confirms these are excluded.
Types of EPS
Beyond basic and diluted figures, you’ll see other versions of EPS in company reports and market commentary. Each one adjusts either the profit figure or the time period.
Adjusted EPS
Adjusted EPS removes one-off items that don’t reflect a company’s ongoing operations. Examples include legal settlements, restructuring costs or a gain on selling a business unit.
Stricter rules apply to these figures soon. International Financial Reporting Standard (IFRS) 18 amends IAS 33, and IFRS 18 takes effect for annual reporting periods beginning on or after 1 January 2027.
Under the amended IAS 33, as summarised by Deloitte’s IAS Plus, any extra per-share amount in the notes must then use one of two numerators: an IFRS 18 total or subtotal, or a management-defined performance measure. That ties adjusted EPS to a clearly defined profit measure, shown separately from the required basic and diluted EPS.
Trailing EPS vs forward EPS
Trailing EPS uses actual reported profit from the past 12 months, so it’s based on real results. Forward EPS uses forecasts for the next 12 months, which helps with planning but relies on estimates.
How EPS is reported in Malaysia
If you’re reading a Bursa Malaysia-listed company’s annual report, or preparing your own business to list, Malaysian accounting standards set the EPS rules. Here’s what applies.
The Malaysian Accounting Standards Board (MASB) requires entities other than private entities to apply the Malaysian Financial Reporting Standards (MFRS) Framework. This has applied since annual periods beginning on or after 1 January 2012. MFRS standards are, in substance, word for word in agreement with IFRS Accounting Standards, according to the IFRS Foundation’s Malaysia profile.
That means EPS follows MFRS 133, which is equivalent to IAS 33. The standard applies to companies whose ordinary shares or potential ordinary shares are publicly traded, according to the IFRS Foundation. A non-public company that chooses to present EPS must follow it too.
Companies show basic and diluted EPS on the face of the statement of profit or loss and other comprehensive income. The Institute of Chartered Accountants in England and Wales (ICAEW) sets this out in its IAS 33 guide. IAS Plus adds that both figures get equal prominence and are shown for continuing operations.
Private entities can instead use the Malaysian Private Entities Reporting Standard (MPERS), the IFRS Foundation profile notes. So if you run a private Sdn Bhd, EPS is mostly a figure you’ll read in listed companies’ reports until you prepare to list.
How EPS is used
EPS is most useful as a comparison, either against other companies or against the same company’s past results. It works best alongside other ways of measuring profitability, such as margins and returns.
Compare EPS between companies in the same industry, since profit levels vary widely between sectors. A retailer and a software company can have very different EPS for reasons unrelated to how well they’re run.
EPS also feeds into the price-to-earnings (P/E) ratio, which is the share price divided by EPS. A company trading at RM5.00 with an EPS of 50 sen has a P/E ratio of 10.
That means investors pay RM10 for every RM1 of annual earnings. The P/E ratio is one of several earnings-based methods for valuing a company.
Tracking EPS over several years shows whether profit per share is growing. Steady growth suggests the company is lifting profit faster than it’s issuing new shares.
EPS and dividends
EPS and dividends are two separate figures: EPS is the profit earned per share, while a dividend is the cash paid out per share. The company decides how much profit to pay as dividends and how much to keep as retained earnings.
The dividend payout ratio shows that split. You calculate it by dividing dividends per share by EPS.
If a company earns 40 sen per share and pays 10 sen in dividends, its payout ratio is 25%. A lower ratio often means the company is reinvesting for growth, while a higher ratio suits investors who want regular income.
What is a good EPS?
A good EPS depends on context, so there’s no single target number. An EPS of RM0.20 could be strong for a young company and modest for a large, established one.
To judge whether a company’s EPS is healthy, look at:
- its position against similar companies in the same industry
- its growth trend over several years
- the company’s size and maturity
- the share price, through the P/E ratio
Limitations of EPS
EPS is a helpful starting point, and it gives the clearest picture when you read it with profitability ratios and other figures. Keep in mind that EPS:
- reflects profit only, so check the balance sheet to see how much debt sits behind it relative to shareholders’ equity
- measures profit per share rather than how efficiently a company uses its assets
- can rise after share buybacks reduce the share count, even when total profit stays flat
- depends on accounting policies, so two companies with the same profit can report different EPS
- sits apart from the share price, so pair it with the P/E ratio to judge value
Track your business profitability with Xero
EPS starts with profit, and knowing your own profit clearly helps you make confident decisions as your business grows. Xero brings your accounting data into easy-to-read financial reports, including profit and loss and balance sheet reports. You can see where you stand in real time. Try Xero today and get one month free.
FAQs on earnings per share
Here are answers to common questions about earnings per share.
Can EPS be negative?
Yes. When a company makes a net loss, EPS is negative, and the IAS 33 standard still requires companies in scope to present it as a loss per share.
What’s the difference between EPS and the P/E ratio?
EPS measures profit per share, while the P/E ratio tells you how much investors pay for each ringgit of that profit. A high P/E ratio often signals that investors expect strong future growth.
How do bonus issues and share splits affect EPS?
A bonus issue or share split increases the share count without bringing in new money, so EPS falls. IAS 33 requires companies to restate prior-period EPS for these changes, as KPMG’s EPS handbook explains, which keeps year-on-year comparisons fair.
Where can you find a company’s EPS?
You’ll find basic and diluted EPS at the bottom of the statement of profit or loss in the annual report.
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.