The math for earnings per share (EPS) is simple enough: Divide the company's net income by the number of outstanding shares of its stock. But at least five variations of EPS are being used these days, from GAAP EPS to retained EPS, and an investor needs to understand what each represents to draw any useful information from the number.

The EPS announced by a company may differ significantly from what is reported in its financial statemen𓃲ts and news headlines. Depending on the EPS used, a stock 🐠may appear overvalued or undervalued.

Here are the five varieties of EPS and what each tells you about a company's performance.

Reported EPS or GAAP EPS

Reported EPS or GAAP EPS is the number derived from ꧋澳洲幸运5官方开奖结果体彩网:generally acc🍒epted accounting principles (GAAP) that must be repoꦕrted by a company as part of its Securities &a🃏mp; Exchange Commission (SEC) filings.

But even this number can be misleading.

For example, a one-time gain from the sale of a subsidiary or even of machinery could be considered operating income under GAAP, causing EPS🍌 for the quarter to spike.

Similarly, a company could classify a big lump of normal operating expenses as an "unusual charge," which excludes it from the calculation and artificially boosts EPS.

Investors need to read the footnotes to see what factors are being included in those ꦕsupposedly normal earnings.🐽

Ongoing/Pro Forma EPS

Ongoing or pro forma EPS is based on ordinary net income and therefore excludes anything that could be termed an unusual one-time event. Investors look at it to determine the company's stream of earnings from its core operations.

The logic is that ongoing EPS is a reasonably reliable indicat♑or of future EPS.

This variation is also called 澳洲幸运5官方开奖结果体彩网:pro forma EPS, indicating that some assumptions had to be used in the formula. Pro forma EPS generally excludes some expenses or income that were used in calculating reported earnings.

For example, if a company sells a large division, it could, in reporting its historical results, exclude the past expenses and revenues associated with that unit. This allows for an "apples-to-apples" comparison.

In reporting pro forma EPS, a company's management may choose to subtract some expenses because they are one-time costs. That distorts the company's true earnings.

Non-recurring expenses, however, are appearing with increasing regularity th💜ese days. This raises the concern that some companies are just fiddling with numbers to enhance their EPS.

Carrying Value/Book Value EPS

Carrying value per share, more commonly referred to as the 澳洲幸运5官方开奖结果体彩网:book value of equity per share (BVPS), measures the amount of company equity in each share. This measure focuses on the balance sheet and not much else, so it is a static♒ rep🍸resentation of company performance.

A company's carrying value EPS is viewed mostly in a trend line that can show how effective management is at increasing shareholder equity over time.

In addition, a company's current BVPS should tell the investor how much a share would be worth if the company had to be liquidated and all of its assets sold.

Retained EPS

Retained EPS is determined using a slightly more complicated formula. Calculating retained earnings per share requires taking the net earnings number, adding any currently held retained earnings, subtracting the total amount of dividends paid out, and finally dividing the remainꦬing amount by the number of oꦍutstanding shares.

That figure is the amo♎unt of profit that is kept by the company rather than being shared with stockholders in the form of dividends.

The amount of any retained earnings not speꦫnt in a given period is added to the net earningꦡs of the following period to arrive at the retained earnings calculation for that period.

In short, retained earnings are the accumulated profit that the company keeps. It is listed on a balance sheet as a line item under 澳洲幸运5官方开奖结果体彩网:stockholders' equity.

Th🥂is number can show a loss, which is called negative retained earnings. It is subtracted from net earnings in the following period.

A company might intend to use retained earnings to pay off debts or to expand its operations in ways that generate🍸 future income. Or it can simply be kept as a reserve.

Knowing how much profit to use to pay dividends and how much to keep as retained earnings is part of good business management. Watching a company's retained earnings per share over time can help determine if a company is handling its profits wisely.

Cash EPS 

Cash EPS is 澳洲幸运5官方开奖结果体彩网:operating cash flow divided by diluted shares outstanding. Cash EPS is important because it is a purer number. That is, it represents real cash earned and it cannot be manipul💝ated as easily as netও income.

A company with reported EPS of 50 cents aꦅnd cash EPS of $1 is preferable to a 😼firm with reported EPS of $1 and a cash EPS of 50 cents.

Although there are many fಌactors to consider, the company that has the cash is generally in better financial shape.

Understanding EPS Overall

As noted, EPS is the total net income divided by the number of shares outstandin🌜g. However, either of those numbers can change depending on how you define earnings and sh💖ares outstanding.

Corporate spin doꩲctors𝓰 try to focus media attention on the number the company wants in the news, which may or may not be the EPS that is reported in documents filed with the Securities and Exchange Commission (SEC).

Defining Earnings

Based on a different set of assumptions, a company may report a high EPS number, which reduces the 澳洲幸运5官方开奖结果体彩网:P/E multiple and🅺 makes the stock look undervalued. The EPS reported to the SEC may result in a much lower EPS꧋ and an overvalued stock on a P/E basis.

This is why investors must read carefully and know what type of earnings are being u🐟sed in the𝄹 EPS calculation.

Defining Shares Outstanding

The number of shares outstanding can be 🧸stated as either primary or as fully diluted.

• Primary EPS, also called standard EPS, is the number of shares that have been issued and are held by investors. These are the shares that are currently in the market and can be traded.
• 澳洲幸运5官方开奖结果体彩网:Diluted EPS is the total number of shares that would be outstanding in addition to the current ones if all exercisable warrants, stock options, and 澳洲幸运5官方开奖结果体彩网:convertible bonds were converted into shares at a point in time, generally the end of a quarter.

Investors tend to prefer diluted EPS because it is a more conservative number. The number of dilu༒ted shares can change as share prices fluctuate, but generally, traders assume that the number is fℱixed as stated in the FCC filing.

Regulations require public companies to list both versions in their financial statements. Sometimes, diluted and primary EPS are ꦅidentical, because the company does not have any outstanding options, warrants, or convertible bonds.

Companies may focus on either primary or diluted EPS when talking to investors and the media, so investors need to be sure wh♌ich is the focus.

The Bottom Line

Any company's financial report is a dense block of numbers listed in numbing detail. For most investors, only a few of those numbers are critical. Earnings per share (EPS) is one of those numbers, as it indicates a company's real profit.

That number comes in no fewer than five varieties, though. If a company is touting one of its EPS numbers, it may be trying to deflect attention from a less flattering take on EPS that excludes some expenses.