Earnings Per Share (EPS): The complete guide for traders

The basics: what is earnings per share (EPS)? 

Earnings per share is one of the most important numbers in finance. Simply put, it tells you how much profit a company makes for each share of its stock.

EPS explained simply

Imagine you own a local bakery chain that made S$100,000 in profit last year. If your bakery has 10,000 shares, each share earned S$10. That's your earnings per share.

Why traders track EPS

EPS is particularly useful because it allows you to compare profitability across different companies, regardless of their size, whether you're looking at blue chips on the Straits Times Index (STI) or smaller companies on the SGX Catalist board.

Companies typically report EPS figures quarterly and annually. In Singapore, listed companies must report their earnings quarterly within 45 days after each quarter ends (except for the fourth quarter, which has a 60-day deadline).

Remember that EPS shouldn't be viewed in isolation. Always consider it alongside other financial metrics to get a complete picture of a company's financial health.

Step-by-step: how to calculate earnings per share

The basic formula for calculating EPS is straightforward:

EPS = (Net Income - Dividend Payments) / Weighted Average Shares Outstanding

Let's break down each component:

• Net income is the company's total profit after deducting all expenses, taxes and costs. You'll find this figure on the income statement.
• Preferred dividends are payments made to holders of preferred shares. These need to be subtracted since EPS focuses on earnings available to common shareholders.
• Outstanding shares refers to the total number of shares held by all shareholders. Companies typically use the weighted average number of shares during the reporting period.

DBS Group example: calculating EPS for a Singapore blue chip

Let's apply this formula to DBS Group's FY2024 earnings:

• Net income: S$9.42 billion
• Preferred dividends: S$0.22 billion
• Outstanding shares: 2.58 billion

DBS Group FY2024 EPS calculation:

(S$9.42 billion - S$0.22 billion) ÷ 2.58 billion shares = S$3.57 per share

This matches DBS's reported EPS of S$3.57 for the fiscal year, representing a 5.6% year-on-year increase. This outperformance could create potential trading opportunities.

Microsoft example: calculating EPS for a global tech leader

Let’s take a look at Microsoft’s Q2 2025 EPS:

• Net income: US$24.1 billion
• Preferred dividends: US$0
• Outstanding shares: 7.434 billion

Microsoft Q2 2025 EPS calculation:

US$24.1 billion ÷ 7.434 billion shares = US$3.24 per share

This represents a 10.2% year-on-year increase.

Why EPS matters to traders

EPS is a practical trading tool that can directly impact your decision-making.

1. Price movement prediction

When a company reports EPS significantly above analyst expectations (typically by 5% or more), its stock price often jumps 1-3% immediately and may continue upward for several days. This is a pattern known as post-earnings announcement drift¹.

2. Entry and exit timing

Savvy traders use earnings seasons as key periods for entry and exit decisions:

• Pre-announcement strategy: Some traders exit volatile positions before earnings to avoid unpredictable gaps
• Post-announcement entries: Others wait for the earnings report and enter positions only after the EPS numbers clarify the company's trajectory
• Volatility plays: Option traders specifically target earnings announcements to capitalise on the increased volatility, regardless of direction

For Singapore traders, the four main earnings seasons (Feb, May, Aug, Nov) offer regular trading opportunities. Using IG's extended hours trading is particularly valuable for US stocks, as you can react to announcements that occur when the Singapore market is closed.

3. Risk management signals

EPS trends provide early warning signs that help traders manage risk:

• Sequential EPS declines often precede price downtrends
• Narrowing profit margins (even with stable EPS) can signal future problems
• Consistent EPS beats might indicate a stock that's safer to hold through market turbulence

4. Sector rotation opportunities

Comparing EPS growth across sectors helps traders identify where to focus. Traders can use these sector-wide EPS trends to rotate capital into strengthening sectors before the broader market fully recognises the shift.

5. Technical validation
 

Technical traders use EPS as confirmation for chart patterns:

• A breakout above resistance becomes more reliable when supported by strong EPS growth
• A stock holding support despite an EPS miss might signal strong underlying demand
• Divergence between improving EPS and weakening price action often resolves in favour of the EPS trend

¹ "Post–Earnings-Announcement Drift: Delayed Price Response or Risk Premium?" by Bernard and Thomas, Journal of Accounting Research, 1989.

Understanding different types of EPS calculations

Not all EPS calculations are created equal. Understanding the different types can give you a more nuanced view of a company's performance.

Basic EPS: the standard profitability measurement

This is the standard calculation we've discussed, representing a company's net income divided by its outstanding shares.

Formula: Basic EPS = (Net Income - Preferred Dividends) ÷ Total Outstanding Common Shares

Basic EPS is useful for initial assessment but doesn't account for potential share dilution or one-off financial events.

Adjusted EPS: focusing on core business performance

Adjusted EPS excludes one-time or non-recurring items that might distort the company's true operational performance, such as:

• Restructuring costs
• Legal settlements
• Gains or losses from asset sales
• Write-downs or impairments

Formula: Adjusted EPS = (Net Income +/- Non-Recurring Items) ÷ Outstanding Shares

Diluted EPS: accounting for potential share dilution

Diluted EPS accounts for the potential increase in outstanding shares from convertible securities like stock options, convertible preferred shares, and warrants.

Formula: Diluted EPS = (Net Income - Preferred Dividends) ÷ (Outstanding Shares + Potential Convertible Shares)

Diluted EPS is almost always lower than basic EPS and presents a more conservative view of a company's earnings. Companies listed on the SGX are required to report both basic and diluted EPS under Singapore Financial Reporting Standards.

How to use EPS in your trading strategy

Now that you understand EPS, here's how to apply this knowledge to your trading decisions:

Trading earnings announcements

Many traders specifically focus on the periods around quarterly earnings announcements. Significant deviations from expected EPS can create volatile price movements and trading opportunities.

For SGX-listed companies, earnings are typically announced before the market opens (7-8:30am) or after market close (5-7pm). Be prepared to act during these times if you're focusing on earnings announcement strategies.

Momentum trading based on EPS trends

Look for companies showing accelerating EPS growth over multiple quarters. This often indicates business momentum that can drive share prices higher, creating opportunities for momentum traders.

Combining EPS with technical analysis

For a more comprehensive approach, combine EPS analysis with technical chart patterns. For example, you might look for stocks with strong EPS growth that are also showing bullish technical patterns like breakouts or golden crosses.

This approach works well in Singapore's market, where institutional traders often use a combination of fundamental and technical factors in their decision-making.

Sector rotation based on EPS trends

In Singapore's diverse market, different sectors show strength at different times. Use EPS trends to identify which sectors are experiencing the strongest profit growth and consider rotating your trading focus accordingly.

Tracking EPS announcements with IG

Now that you understand how to use EPS in your trading strategy, timing becomes crucial. Knowing exactly when companies will release their earnings reports gives you an edge in the markets.

IG Singapore’s economic and trading calendar helps you stay on top of upcoming earnings announcements across global markets.

• Monitor when companies are scheduled to report their results
• Track important financial events across global markets
• Filter for the events that matter most to your trading strategy
• Plan your trades around potential market-moving announcements

By combining your EPS analysis skills with our real-time calendar, you can position yourself to capitalise on price movements that typically follow earnings surprises.

Explore our economic calendar to start tracking the next wave of earnings announcements.