Earnings per share: the metric easiest to improve without improving the business

Earnings per share is among the most quoted metrics and among the most convenient to manage.

What it is

Net profit attributable to a single ordinary share. It is what sits in the denominator of P/E.

491 000 000 000

How it is improved without the business growing

By buying back shares: the same profit, fewer shares, a higher figure — Buybacks: the quieter alternative to a dividend.

By one-off items: selling an asset raises profit in the reporting year without changing the business's ability to earn.

By revaluations: exchange differences and asset revaluations land in profit without being money.

Diluted earnings per share

Calculated including instruments that may turn into shares — employee options, convertible bonds. It is the more honest figure because it accounts for future dilution — A new share issue: why it hits existing owners.

What the metric ignores

Debt. Two companies with the same earnings per share but different leverage carry different risk. Hence the need to read leverage alongside it.

And cash flow: profit is an accounting figure while dividends are paid in money — The cash flow statement: why it is more honest than profit.