What is EPS Guidance?
871 reads · Last updated: December 5, 2024
Earnings per share forecast (EPS guidance) refers to the forecast of expected earnings per share for a certain period of time in the future. This forecast can be used by investors to assess the company's future profitability and growth prospects.
Definition
EPS guidance refers to a company's forecast of its expected earnings per share over a future period. This forecast helps investors assess the company's future profitability and growth prospects.
Origin
The concept of EPS guidance originated in the late 20th century as investors became more focused on a company's future profitability. Companies began providing these forecasts to help investors make more informed decisions. Particularly in the 1980s and 1990s, with the globalization of financial markets and the advancement of information technology, such guidance became more common.
Categories and Features
EPS guidance can be categorized into qualitative and quantitative guidance. Qualitative guidance typically involves the company's outlook on future market conditions, while quantitative guidance provides specific EPS figures. Quantitative guidance is more direct but can be more susceptible to market fluctuations and external factors. Qualitative guidance offers broader context but may lack specificity.
Case Studies
A typical example is Apple Inc., which provides EPS guidance in its quarterly earnings reports. Apple usually offers expected EPS for the next quarter, helping investors evaluate its future profitability. Another example is Amazon.com Inc., where the EPS guidance provided in its earnings reports often influences short-term stock price movements as investors adjust their strategies based on this guidance.
Common Issues
Common issues investors might face when using EPS guidance include overly optimistic or pessimistic guidance leading to misguided investment decisions, and changes in market conditions causing actual earnings to differ from guidance. Investors should use other financial metrics and market analysis to comprehensively evaluate a company's future performance.
