The annual percentage change in a company’s EPS. The calculation is a given year’s EPS minus the prior year’s EPS, divided by the prior year’s EPS. The resulting figure is then multiplied by 100.
Benefit
If this figure is positive, the company’s earnings are growing; if it’s negative, earnings are generally declining. However, it’s best to look at the EPS % Change for each of the past several years. Sometimes a one-time charge can depress earnings for a single year, even though the company’s earnings are generally rising; in other cases, earnings may have only started slipping in the most recent year. Annual EPS % Change figures give a more long-term perspective than quarterly figures.
Origin
Calculated in-house using EPS from two consecutive years.
For the Pros
Earnings per share is the portion of a company's profit allocated to each outstanding share. As of January 1998, all EPS numbers collected by Morningstar are Diluted EPS (as per FASB 128). Diluted EPS is calculated by dividing net income (plus convertible-preferred dividends and after-tax amount of interest recognized in the period, associated with any convertible debt) by the sum of the weighted-average shares outstanding, and any additional common shares that would have been outstanding if the dilutive potential common shares had been issued. In the past, Morningstar has used Primary EPS on a consistent basis.