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EPS (Earnings Per Share) is a widely used metric to assess a company’s financial performance. The calculation of EPS is the net earnings of a company divided by the number of outstanding shares. However, EPS can be calculated using Generally Accepted Accounting Principles (GAAP) or non-GAAP measures. While GAAP measures are essential for compliance and consistency, non-GAAP measures can provide additional insights into a company’s financial performance that may not be apparent from GAAP measures alone.
General Knowledge
GAAP is a set of accounting standards that public companies in the United States must follow. These standards are designed to ensure consistency and transparency in financial reporting. GAAP measures generally include all expenses and income required by accounting standards to be recognized in the financial statements. This means that GAAP measures provide a standardized method for comparing the financial performance of different companies.
Non-GAAP measures, on the other hand, exclude certain items that companies believe do not accurately reflect their ongoing operations. Non-GAAP measures can provide more flexibility and transparency than GAAP measures, as companies can choose which non-GAAP measures to report and can provide additional context around why these measures are useful. Non-GAAP measures can also exclude expenses or income that are not reflective of a company’s ongoing operations, such as one-time expenses or gains/losses from the sale of assets.
Examples
One example of a non-GAAP measure is adjusted earnings. Adjusted earnings exclude certain expenses, such as restructuring costs or asset impairment charges, which are not expected to recur in the future. By excluding these expenses, adjusted earnings can provide a more accurate representation of a company’s true operating performance.
Another example of a non-GAAP measure is the exclusion of stock-based compensation expenses from non-GAAP earnings. Stock-based compensation is a significant expense for many technology companies, and excluding it from non-GAAP earnings can provide a clearer picture of the company’s profitability.
While non-GAAP measures can provide additional insights into a company’s financial performance, they can also be misleading if not used appropriately. Companies may use non-GAAP measures to manipulate their earnings to make them appear better than they are. As such, the Securities and Exchange Commission (SEC) has rules and guidelines that companies must follow when presenting non-GAAP measures in their financial statements. These rules require companies to provide a reconciliation between the GAAP and non-GAAP measures, as well as disclose why the non-GAAP measure is useful and how it differs from the GAAP measure.
Conclusion
In conclusion, EPS is a crucial metric that investors use to assess a company’s financial performance. While GAAP measures are important for compliance and consistency, non-GAAP measures can provide a more accurate reflection of a company’s underlying performance. Non-GAAP measures can exclude expenses or income that are not reflective of a company’s ongoing operations and provide more flexibility and transparency than GAAP measures. However, investors should exercise caution and ensure that they fully understand how non-GAAP measures are calculated and what they represent. Additionally, investors should always compare non-GAAP measures to GAAP measures to get a complete picture of a company’s financial performance.
Our platform provides non-GAAP earnings, however, in cases when companies do not publish non-GAAP earnings information provided by the API is GAAP.
You can find historical corporate earnings information in our Fundamental’s API Earning section, an example of the request is the following :
https://eodhistoricaldata.com/api/fundamentals/AAPL.US?api_token=demo&filter=Earnings
Or you can find information on earnings using our dedicated UpcomingEarnings API, more information you will find here:
https://eodhistoricaldata.com/financial-apis/calendar-upcoming-earnings-ipos-and-splits/
