Issue #9 - The right historical EPS
Synonym of earnings is profit. As an owner of a business, the main purpose of operating a business is to profit from it. No one would not like to own a business that losses money, isn't it? Well, this should be the rationale of a normal person.
There are 2 earnings/profits usually found reported in an income statement of a company, i.e. gross and net earnings.
1. Gross earnings. This is the profit generated from sales. Straightforwardly,
Gross earnings = Revenue - Cost of Sales
2. Net earnings. This is profit generated from the business operation after taking into account of interest, taxes, depreciation, amortization and other expenses.
Net earnings = Gross earnings - Interest - Taxes - Depreciation - Amortization - Other Expeneses
Net earnings per share (EPS) is a measurement of how much net earnings are attributed to a unit of share of the company. This metric is often used to compare profitability of different companies.
EPS = Net earnings / Weigted-average of outstanding shares
Key points from "The New Buffettology" (Buffet & Clark, 2002):
1. Historical per share earnings that are both strong and show upward trend indicate a durable competitive advantage.
2. Historical per share earnings tthat are wildly erratic indicate a price-competitive business.
Again, the keyword is consistent. Below are EPS of SP Setia. As a comparison, EPS of Island & Peninsular is listed as well.
SP Setia has better earning capability than Island & Peninsular. SP Setia has upward EPS.
There are 2 earnings/profits usually found reported in an income statement of a company, i.e. gross and net earnings.
1. Gross earnings. This is the profit generated from sales. Straightforwardly,
Gross earnings = Revenue - Cost of Sales
2. Net earnings. This is profit generated from the business operation after taking into account of interest, taxes, depreciation, amortization and other expenses.
Net earnings = Gross earnings - Interest - Taxes - Depreciation - Amortization - Other Expeneses
Net earnings per share (EPS) is a measurement of how much net earnings are attributed to a unit of share of the company. This metric is often used to compare profitability of different companies.
EPS = Net earnings / Weigted-average of outstanding shares
Key points from "The New Buffettology" (Buffet & Clark, 2002):
1. Historical per share earnings that are both strong and show upward trend indicate a durable competitive advantage.
2. Historical per share earnings tthat are wildly erratic indicate a price-competitive business.
Again, the keyword is consistent. Below are EPS of SP Setia. As a comparison, EPS of Island & Peninsular is listed as well.
SP Setia
Years EPS(RM)
2005 0.324
2004 0.285
2003 0.227
2002 0.225
2001 0.228
2000 0.242
1999 0.275
1998 0.237
Island & Peninsular
Years EPS(RM)
2005 0.202*
2004 0.324
2003 0.137
2002 0.114
2001 0.113
2000 0.245
1999 0.423
1998 0.339
*exceptional item excluded
SP Setia has better earning capability than Island & Peninsular. SP Setia has upward EPS.
posted by yitping at 10:18 PM
3 Comments:
Again, the keyword is consistent. Below are EPS of IOI Property Bhd. As a comparison, EPS of Sunway City Bhd is listed as well.
IOI Property Bhd
Years EPS (RM)
2005 $0.72
2004 $0.69
2003 $0.53
2002 $0.49
2001 $0.43
2000 $0.49
1999 $0.50
1998 $0.25
1997 $0.30
1996 $0.29
Average $0.47
Sunway City Bhd
Years EPS (RM)
2004 $0.16
2003 $0.06
2002 $0.33
2001 $(0.01)
2000 $(0.02)
1999 $0.05
1998 $(0.26)
1997 $(0.09)
1996 $0.33
Average $0.06
IOI Property Bhd has much greater earning capability than Island Sunway City Bhd. IOI Property Bhd has upward EPS.
SP Setia Q2 '06 quarterly report is out.
EPS of I&P of RM0.151 per share was calculated by excluding proceeds received from discontinuing its plantatation business. However, additional shares in effect of this transaction should be excluded as well. Hence, the revise EPS was found to be RM0.202 and re-posted here.
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