PAT means Profit after tax or net profit or profit available for equity shareholders. A company having increasing profits/PAT can have lesser EPS than the last results due to increase in the number of shares issued by the company. Increase in number of shares are due to issue of bonus shares or share split or stock options being exercised or issue of new/fresh equity shares.
EPS (Earnings per share) is an important metric tracked by investors, shareholders and analysts. It is calculated by diving PAT by the number of shares. Since outstanding number of equity shares is in the denominator, any change in the same would inversely affect the EPS despite rise in numerator.
e.g A company having PAT of Rs 100 crores has 10 crore outstanding/issued equity shares in year 1. The EPS in this case is Rs 10. In Year 2, PAT increases to 120 crores. Also, in year 2 company issues a bonus share in the ratio of 1:1 which makes the outstanding shares to 20 crore. The EPS in this case is 120/20= Rs 6 for year 2. Thus we can see the increase in number of shares affects the EPS despite increase in PAT levels of the company.
EPS (Earnings per share) is an important metric tracked by investors, shareholders and analysts. It is calculated by diving PAT by the number of shares. Since outstanding number of equity shares is in the denominator, any change in the same would inversely affect the EPS despite rise in numerator.
e.g A company having PAT of Rs 100 crores has 10 crore outstanding/issued equity shares in year 1. The EPS in this case is Rs 10. In Year 2, PAT increases to 120 crores. Also, in year 2 company issues a bonus share in the ratio of 1:1 which makes the outstanding shares to 20 crore. The EPS in this case is 120/20= Rs 6 for year 2. Thus we can see the increase in number of shares affects the EPS despite increase in PAT levels of the company.
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