Adjusted EPS
Adjusted EPS refers to the indicator of earnings per share adjusted by a company according to a certain standard (such as non-GAAP). This indicator can be used to evaluate a company's profitability and financial condition.
Definition: Adjusted Earnings Per Share (Adjusted EPS) refers to the metric where a company's earnings per share are adjusted according to certain standards (such as non-GAAP). This metric is used to evaluate a company's profitability and financial condition. Adjusted EPS typically excludes one-time or non-recurring items, such as restructuring costs, asset impairment losses, etc., to more accurately reflect the company's ongoing operational capability.
Origin: The concept of Adjusted EPS originated from the need of investors and analysts for more accurate assessments of a company's financial statements. Over time, more companies began to provide Adjusted EPS in their financial reports to help investors better understand the company's financial performance.
Categories and Characteristics: Adjusted EPS can be divided into the following categories:
- Basic Adjusted EPS: EPS after excluding one-time items.
- Diluted Adjusted EPS: EPS considering potential dilution factors (such as convertible bonds, options, etc.).
- More accurately reflects the company's ongoing operational capability.
- Excludes non-recurring items, reducing volatility in financial statements.
- Helps investors make comparisons between companies.
Specific Cases:
- Case 1: A company incurred a one-time restructuring cost of $1 million in a particular quarter, leading to a significant drop in its EPS. By using Adjusted EPS, excluding this cost, investors can see that the company's actual profitability was not significantly affected.
- Case 2: Another company experienced an asset impairment loss of $2 million in a certain year, significantly lowering its EPS. Adjusted EPS excluded this loss, allowing investors to more accurately assess the company's operational condition.
Common Questions:
- Why use Adjusted EPS? Adjusted EPS can exclude one-time or non-recurring items, more accurately reflecting the company's ongoing operational capability.
- Is Adjusted EPS always higher than standard EPS? Not necessarily, the level of Adjusted EPS depends on the items excluded and the standards of adjustment.
- Does Adjusted EPS comply with accounting standards? Adjusted EPS is usually based on non-GAAP standards but still needs to be disclosed and explained in financial reports.
