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Norm
(normalised) EPS growth
This line
shows, for each period, how much EPS have grown, or are expected
to grow, when measured against the previous period. A minus
sign indicates negative growth. In order to ensure that the
growth being measured reflects the trend of underlying earnings,
reported EPS are compared on a normalised and annualised basis.
The growth
shown for each reported period is calculated by reference to
the previous year’s normalised EPS. For the two forecast periods,
it is the year-on-year percentage by which the normalised EPS
must grow in order to achieve the consensus forecasts shown.
The calculation
is as follows:
Step 1:
(THIS
YEAR’S EPS)
- (PREVIOUS
EPS)
= EPS CHANGE
(+ OR -)
Step 2:
EPS
CHANGE
-------------------
X 100 = EPS GROWTH (%)
PREVIOUS
EPS
In order
to ensure that a realistic measure of growth is achieved, it
is essential that comparison should only be made between EPS
figures calculated on a genuinely similar basis. This is particularly
important when comparing historic EPS (based on reported results)
for consecutive periods, or when comparing the last reported
EPS with a forecast for the following period.
Historic
EPS figures used for measuring growth are calculated on a normalised
basis, which excludes any non-trading or exceptional profits
and losses. This is because any forecast results almost certainly
exclude the effect of any future events of an exceptional nature.
The full methodology for calculating normalised EPS is described
in calculating
normalised and IIMR earnings.
When a preliminary
results announcement has just been received, and brokers have
not yet reacted, the composition of the consensus, upon which
the growth percentage is based, is arrived at by comparing the
newly announced historic normalised EPS for the latest period
with each of the previously existing forecasts for the following
period. Individual forecasts are eliminated from the consensus
when the actual result (i.e. the newly announced historic normalised
EPS) deviates from the forecast it supersedes by more than 5%.
Superseded estimates, and the consensus calculation, are explained
in greater detail in broker
forecasts.
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