Earnings Per Share (EPS): What Aussie Investors Need to Know in 2025

Earnings per share (EPS) is the corporate world’s go-to performance yardstick, a figure that pops up in every ASX report and financial news bulletin. But in 2025, as economic headwinds, accounting standards, and new disclosure rules reshape the market, understanding EPS is more crucial than ever for Australian investors—seasoned or new to the game.

Why EPS Matters in Today’s Market

EPS represents the portion of a company’s profit allocated to each outstanding share of common stock. In simple terms, it tells you how much money a company makes for each share you own. A rising EPS generally signals improving profitability and is often a driver of share price growth. But context is everything—especially in 2025.

• EPS and Valuations: Investors and analysts use EPS to calculate key ratios, like the price-to-earnings (P/E) ratio, which helps compare companies across sectors.

• Dividend Potential: While not a guarantee, a higher EPS can indicate a company’s capacity to pay or increase dividends—critical for income-focused Australians, especially with the RBA’s official cash rate remaining above 4% in early 2025.

• Market Sentiment: Companies reporting better-than-expected EPS often see a surge in investor confidence, while earnings misses can trigger sharp share price drops.

How EPS Is Calculated—and Why It’s Changing in 2025

At its core, the EPS formula is straightforward:

EPS = (Net Profit – Dividends on Preferred Shares) / Weighted Average Shares Outstanding But the devil’s in the detail. In 2025, changes to Australian Accounting Standards Board (AASB) rules and ASIC’s enhanced earnings guidance are prompting companies to be more transparent about how they calculate and report EPS.

• Basic vs Diluted EPS: Basic EPS uses the current number of shares, while diluted EPS accounts for potential shares from options and convertible securities—crucial for tech stocks and companies with large executive incentive schemes.

• Pro Forma EPS: Some companies now report ‘pro forma’ or ‘adjusted’ EPS, stripping out one-off items (like asset sales or restructuring costs) to give a clearer view of underlying performance. ASIC’s 2025 guidance requires firms to clearly reconcile these figures to statutory earnings.

• Reporting Deadlines: New ASX rules in 2025 mean companies must release full-year results within 60 days of financial year-end, speeding up EPS updates for investors.

Example: Consider Woolworths Group, which reported a net profit of $1.7 billion in FY24. With roughly 1.3 billion shares outstanding, their basic EPS would be around $1.31. However, including share-based compensation and adjustments for discontinued operations could see the diluted or pro forma EPS differ significantly—a key point for 2025’s more discerning market.

Interpreting EPS: Beyond the Headlines

EPS alone doesn’t tell the whole story. Here’s how savvy Aussies are using EPS as part of a bigger investment picture in 2025:

• Growth vs Value: High-growth tech companies may have low or even negative EPS, as profits are reinvested for expansion. Meanwhile, mature banks and miners often post consistent, high EPS—making them attractive for dividend hunters.

• Sector Comparisons: Comparing EPS across sectors can be misleading. For example, resource companies might see EPS swing wildly with commodity prices, while healthcare and utility firms often deliver steadier figures.

• EPS and Buybacks: Share buybacks reduce the number of shares outstanding, artificially boosting EPS even if total profits remain flat. In 2025, with franking credit changes under review, watch for companies increasing buybacks as an alternative to dividends.

• Red Flags: A jump in EPS due to asset sales or accounting tweaks—not real business growth—can be a warning sign. Always check the notes in annual reports for the story behind the numbers.

For retail investors, the 2025 landscape—marked by tighter regulatory scrutiny and more detailed disclosures—makes it easier to dig deeper and ask tougher questions about what’s really driving EPS.

Conclusion: EPS Is Essential, But Context Is King

Earnings per share remains a cornerstone metric for assessing ASX-listed companies, but its true value lies in how you interpret it within a broader financial and regulatory context. As reporting standards evolve and market volatility persists in 2025, understanding the story behind EPS is vital for smarter, more confident investing.