What is Earnings Per Share (EPS)? 2025 Guide for Australian Investors

Earnings Per Share (EPS) is more than just a figure on a company’s financial report—it’s a critical signal that helps Australian investors gauge a company’s profitability and growth potential. In 2025, as transparency standards tighten and the ASX rolls out new reporting guidelines, understanding EPS is more important than ever for those looking to make smart moves on the share market.

What is Earnings Per Share (EPS)?

EPS tells you how much profit a company has generated for each share of its stock. The calculation is straightforward: net profit divided by the total number of outstanding shares. For example, if Sydney-based tech firm Digitech earns $10 million in profit and has 5 million shares, its EPS is $2.00.

• Basic EPS: Only uses ordinary shares currently on the market.

• Diluted EPS: Includes potential shares from options or convertible debt, giving a more conservative view of profitability.

In 2025, most ASX-listed companies must now publish both basic and diluted EPS as part of their half-yearly and annual reports, following new ASIC disclosure rules.

Why EPS Matters for Australian Investors

EPS is a key input for widely used valuation ratios like the Price/Earnings (P/E) ratio, helping investors assess whether a stock is over- or undervalued. But its significance goes deeper:

• Measuring Profitability: A rising EPS generally signals that a company is growing its bottom line.

• Benchmarking Performance: Investors compare EPS trends over time or against sector peers. For instance, major banks like NAB and ANZ saw EPS rebound strongly in their 2024-2025 results as loan margins improved and bad debt charges eased.

• Dividend Insights: Companies with consistently high EPS often have greater scope to pay dividends. In 2025, energy giant Woodside’s steady EPS growth allowed it to boost payouts to shareholders despite a volatile oil market.

However, investors must be wary: EPS can be affected by share buybacks, one-off gains, or accounting changes. That’s why analysts look at adjusted EPS—excluding unusual items—to get a truer picture of underlying profitability.

2025 EPS Trends and Regulatory Changes

Several developments are shaping how Australian investors use EPS in 2025:

• Stricter Disclosure Requirements: The Australian Securities & Investments Commission (ASIC) now requires more detailed EPS breakdowns, including reconciliation with statutory profits and clear explanation of adjustments.

• Sector Spotlights: Tech and healthcare companies, like CSL, are under pressure to show EPS growth to justify high valuations. Meanwhile, resource companies are seeing more volatile EPS figures due to global commodity swings.

• ESG Adjustments: Some analysts are starting to adjust EPS for sustainability costs, reflecting the growing impact of environmental and social factors on profits.

• Share Buybacks: Major firms such as Commonwealth Bank have used share buybacks to lift their EPS, even when net profits are flat—a move that can benefit shareholders in the short term, but may mask underlying performance.

For example, in February 2025, Wesfarmers announced a $1.5 billion buyback program, reducing the number of shares on issue and boosting its EPS—despite only modest profit growth. Investors applauded the move, but analysts cautioned against relying solely on headline EPS.

How to Use EPS in Your Investment Strategy

EPS is a valuable tool—but it shouldn’t be the only metric you consider. Here are some practical tips:

• Look for Consistent Growth: Check a company’s EPS trend over several years, not just one good result.

• Compare Across Peers: Context matters. A mining company’s typical EPS will look very different to a fintech’s.

• Consider Adjusted Figures: Focus on adjusted or ‘underlying’ EPS for a clearer sense of core performance.

• Watch for Red Flags: Large jumps in EPS caused by buybacks or asset sales may not signal sustainable growth.

In 2025’s fast-evolving market, savvy investors blend EPS analysis with other indicators—like revenue growth, debt levels, and sector outlooks—to make balanced decisions.