Four times a year, every listed company in India publishes its financial results. Analysts, fund managers, and traders go through these numbers within minutes of release. The single most watched number in those results is often earnings per share.
EPS, earnings per share, is simple in construction: take the company's net profit for a period and divide it by the total number of shares outstanding. If a company earned Rs 1,000 crore in profit and has 500 crore shares, the EPS is Rs 2. That Rs 2 represents each shareholder's proportional claim on the profits earned.
TTM stands for trailing twelve months. Instead of using the most recent annual report, which may be up to a year out of date, TTM EPS adds up the earnings from the four most recent quarters. This gives you the freshest possible picture of what the company is earning right now, not what it earned when it last filed annual accounts.
Why the market cares about EPS the moment results drop
Stock prices are a function of expected future earnings. Analysts estimate what a company will earn each quarter before the results come out. When the actual EPS lands above those estimates, the stock typically rises. When it lands below, it falls. The gap between the expected EPS and the actual EPS, not the absolute number, is what moves prices on results day.
This is why Infosys can report healthy profits and still see its stock fall sharply. On 21 July 2023, Infosys shares fell about 8% after the company cut its FY24 revenue growth guidance to 1% to 3.5% from 4% to 7%, even though the June quarter itself was profitable. The trailing EPS was fine; what collapsed was the forward EPS investors had been paying for. The profits were real. The disappointment was about the next four quarters, not the last four.
TCS has historically been the more consistent EPS compounder among Indian IT companies. Steady, predictable EPS growth quarter after quarter is a large part of why institutional investors assign TCS a premium valuation, even when the absolute EPS number looks similar to peers. Consistency gets priced higher than occasional spikes.
How buybacks inflate EPS without growing profits
A detail worth understanding: EPS can improve even when total profits are flat, if the company reduces its share count. When a company buys back its own shares and cancels them, the same profit is now divided among fewer shares. Each remaining share's EPS goes up mechanically, without any improvement in the underlying business.
Wipro has executed several buybacks over the years. Each time it reduced its share count, the reported EPS per share rose. Investors who track only EPS without looking at total profits can mistake a buyback effect for genuine business growth. The two look identical in the EPS line but represent very different underlying realities.
Diluted EPS versus basic EPS
Companies often have employee stock options outstanding, convertible bonds, or warrants that could become shares in the future. Diluted EPS accounts for all of these potential shares, giving a more conservative and complete picture of what earnings per share would look like if everything converted.
Basic EPS ignores these potential shares. The difference between the two is small for most companies but can be meaningful for startups and technology companies that issue significant stock options to employees. Zomato and Nykaa in their early listed years had large employee option pools that created a meaningful gap between basic and diluted EPS. Always check which number you are looking at.
EPS TTM versus forward EPS
Analysts also publish forward EPS estimates: what they expect the company to earn over the next twelve months. The PE ratio you see quoted most often uses TTM EPS in the denominator. A forward PE uses the estimate for next year's earnings. For fast-growing companies, the forward PE is often substantially lower than the trailing PE, reflecting the expectation that earnings will rise significantly before the year is out.
TTM EPS is fact. Forward EPS is a guess. Both matter, but they answer different questions.