Net income (Net income) vs. EPS (EPS)

[Alexander131]

Good morning,

 

To study a company, I try to study its growth and net profit.

Until now, I have been using the EPS (earnings per share) growth rate.

 

However, I wonder if the net profit rate is not more logical given that a company can buy back shares or on the contrary increase its capital.

 

Which means that for a company like MCD for example, if I evaluate its EPS rate over 10 years, I get around 18.65%.

If I evaluate its net profit rate, I get 15%, because 200 million shares disappeared.

 

So net profit seems more logical to use, am I wrong?

 

 

Good day

[Jerome]

That's exactly why I prefer earnings per share. Because in the end, it's the share of profit that is contained in each share, and which is therefore in your pocket that interests you. The fact that shares disappear means that a little more wealth goes into your pockets. On the contrary, if there are more shares, the share of the pie becomes smaller.

[Alexander131]

Hmm okay, thanks. It's true that I realized that in the case where a company increases its capital, the net profit is not interesting because it could increase sharply in absolute value following a capital increase.

 

I have another question.

 

I don't understand how Financial Times (markets.ft.com) calculates the EPS growth rate.

 

To stay with the MCD example:

 

When I go to Morningstar, I see:

MCD EPS in 2007: 1.98

MCD EPS in 2012: 5.36

EPS Growth rate (5 years): 22.04% (this is what I also find when calculating it)

If I go to FT, with the same numbers, they find 22.69%

 

The difference is not huge here but I have seen bigger differences on other values.

 

Sometimes there is no difference, for example with CVX both find 8.72%

 

Generally I prefer FT which seems to update reports faster, especially with European companies, but I can't seem to recalculate this rate.

 

If anyone has any idea.

 

Good evening

 

 

[Jerome]

are you really sure that the basic data is the same? apparently on morningstar the rate you indicate is from full 2007 to full 2012 (FY – the whole calendar year), maybe on FT it is sure 12 rolling months (TTM)?

[Alexander131]

I don't think it's TTM since FT specifies that "the fiscal year ends on December 31st".

I feel like they don't take into account "exceptional results".

 

[Jerome]

it is possible, in these ratios there are often several methods, which can vary depending on the period, exceptional results, diluted or consolidated profit, etc. what is important is to rely on a regular and reliable source, and not change, otherwise we lose our Latin

[Author]

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