- Identify businesses that actually make money – not just good at PR and marketing
- Make accurate comparisons between businesses of different sizes and stock prices
- Forecast price appreciation potential based on future EPS improvement prospects
- Detect early signs of decline when EPS begins to drop before stock prices reflect it
- Evaluate sustainable dividend levels that businesses can pay long-term
Pocket Option: Decoding what earnings per share is and how to apply it most effectively
Understanding earnings per share is not just the first step but the most important key to accurately evaluating a company's value and discovering potential investment opportunities before others. In the Vietnamese stock market, where information is not truly transparent, this indicator becomes a compass helping investors navigate among hundreds of listed stocks. This article will provide an exclusive EPS analysis method from Pocket Option, helping you discover potential stocks that most investors are overlooking.
Concept and Importance of Earnings Per Share in the Vietnamese Market
Have you ever wondered why two stocks with the same price can have completely different intrinsic values? The answer lies in earnings per share. What is earnings per share? It is the amount of profit that each outstanding common share brings to shareholders during a reporting period, usually quarterly or annually.
In Vietnam, where the stock market is still young with over 70% individual investors, the EPS indicator becomes a reliable compass. It’s no coincidence that foreign investment funds like Dragon Capital or VinaCapital always prioritize EPS analysis before deciding to invest in any Vietnamese enterprise.
According to the latest survey by Pocket Option with 500 successful investors in Vietnam, 83% of them consider EPS the first indicator they check before buying a stock. The main reason: EPS directly reflects actual business performance, not easily distorted by crowd psychology and market rumors which are very common on HOSE and HNX.
EPS – A Tool to Distinguish “Premium” and “Inferior” Stocks on Vietnam’s Stock Market
Did you know: During the 2020-2024 period, stocks with stable EPS growth above 15%/year in Vietnam delivered an average return of 78%, while the VN-Index only increased by 35%? This is not a random coincidence.
EPS helps Vietnamese investors perform 5 important tasks:
Especially in Vietnam’s context, where information can sometimes be uneven between investor groups, EPS becomes an objective measure helping individual investors narrow the gap with large institutions.
| Parameter | Role in Analysis | Specific Example in Vietnam’s Stock Market |
|---|---|---|
| Stable EPS growth | Reflects sustainable business model | FPT consistently increased EPS 15-20%/year → Stock up 300% (2020-2024) |
| Highly volatile EPS | Warning of cyclical risk | HPG: 2021 EPS reached 5,600 VND, 2022 decreased to 1,500 VND → Price -65% |
| Continuously declining EPS | Sign of serious deterioration | CII: EPS decreased for 4 consecutive years → Price dropped from 40,000 VND to 12,000 VND |
| EPS 30%+ higher than industry | Superior competitive advantage | MWG during 2018-2020 period → ROI for investors +215% |
How to Calculate Earnings Per Share Accurately and Quickly
Now that you understand the importance of EPS, the next question is: how to calculate earnings per share correctly? Pocket Option provides an easy 3-step method applicable to any stock on HOSE, HNX, or UPCOM.
Many new investors often wonder: “how to calculate earnings per share without making mistakes?” The answer lies in applying the correct formula and understanding its components.
The golden formula for calculating EPS:
| EPS = (Net Profit – Preferred Stock Dividends) / Weighted Average Number of Common Shares |
|---|
Let’s analyze each component:
- Net Profit: Taken directly from the “Profit after tax attributable to parent company shareholders” line on consolidated financial statements (not total PAT!)
- Preferred Stock Dividends: Uncommon in Vietnam, but need to check “Preferred dividend payments” in financial statement notes
- Weighted Average Number of Shares: This is the point where many Vietnamese investors miscalculate EPS
How to Calculate Accurate Weighted Average Number of Shares
In the Vietnamese market, additional share issuances occur frequently through: stock dividends, ESOP issuances, private placements… To calculate the weighted average number of shares accurately, apply this formula:
Weighted Avg. Shares = (Initial shares × months existing + New shares × remaining months) / Total months in period
Real example: On April 15, 2024, Vinhomes (VHM) issued 500 million bonus shares from share premium. Previously, VHM had 4 billion outstanding shares. When calculating Q2/2024 EPS, the weighted average shares would be:
Weighted Avg. Shares = (4 billion × 0.5 months + 4.5 billion × 2.5 months) / 3 months = 4.42 billion shares
| Common Mistake | Solution | Impact on Results |
|---|---|---|
| Using end-of-period shares instead of average | Calculate time-weighted average | EPS can be off by 5-20% depending on dilution |
| Ignoring retroactive adjustments | Check financial statement notes for adjustments | Can cause misunderstanding of EPS growth rate |
| Using total PAT instead of PAT attributable to parent company shareholders | Always use “Profit attributable to parent company shareholders” | Especially significant for companies with many minority shareholders |
| Forgetting to examine extraordinary income | Separate and analyze “Other gains/losses” in financial statements | Causes incorrect assessment of core profitability |
7 Exercises to Calculate Earnings Per Share with Real Situations
Nothing is as effective as practice! Pocket Option provides 7 practical exercises with data from leading listed companies in Vietnam. Try your hand at these situations:
Exercise 1: Calculate Basic EPS with Simple Data
Situation: Techcombank (TCB) reported net profit after tax for 2023 of 22,900 billion VND. The number of outstanding shares throughout the year was 3.51 billion shares. TCB has no preferred shares.
Analysis: This is the simplest situation when the number of shares doesn’t change during the period.
Calculation: EPS = 22,900,000,000,000 ÷ 3,510,000,000 = 6,524 VND/share
Conclusion: TCB’s EPS for 2023 is 6,524 VND, higher than the banking industry average (about 3,500 VND), reflecting superior operational efficiency.
Exercise 2: Calculate EPS with Mid-Period Share Issuance
More complex situation: Vietcombank (VCB) had net profit after tax for 2023 of 30,500 billion VND. At the beginning of the year, VCB had 4.7 billion shares. On July 15, 2023, VCB issued an additional 300 million shares as dividend payment and 200 million shares through private placement.
Determining average shares:– First 6 months: 4.7 billion shares- Last 6 months: 5.2 billion shares- Weighted average = (4.7 × 6.5/12) + (5.2 × 5.5/12) = 4.93 billion shares
Calculate EPS: 30,500,000,000,000 ÷ 4,930,000,000 = 6,187 VND/share
| Company | 2023 PAT (billion VND) | Share Changes During Year | Calculated EPS (VND) | Reported EPS (VND) | Difference |
|---|---|---|---|---|---|
| Vinamilk (VNM) | 8,520 | 2.09 billion shares (unchanged) | 4,077 | 4,077 | 0% |
| FPT Corporation | 7,110 | 1.22 billion → 1.37 billion shares (September) | 5,494 | 5,511 | -0.3% |
| Novaland (NVL) | 1,230 | 1.95 billion → 2.31 billion shares (multiple issues) | 603 | 532 | +13.3% |
| Hoa Phat (HPG) | 6,800 | 4.47 billion → 5.81 billion shares (June) | 1,311 | 1,274 | +2.9% |
Do you see the large discrepancy in Novaland’s case? This is why many Vietnamese investors make mistakes when analyzing EPS – they don’t calculate the weighted average number of shares correctly when companies issue multiple rounds during the year.
5 Most Effective Methods to Analyze Earnings Per Share
Knowing how to calculate EPS is not enough; the key to success is knowing how to analyze and apply this indicator to real investment strategies. Pocket Option shares 5 methods that have been proven by professional investors in Vietnam.
Method 1: Analyze EPS Growth Trends
Instead of just looking at the current EPS figure, monitor the growth trend for at least 12 consecutive quarters. Below is a sample analysis with Masan Group (MSN):
| Quarter | EPS (VND) | QoQ Growth | YoY Growth | Business Developments |
|---|---|---|---|---|
| Q1/2022 | 842 | – | – | Winmart chain still losing money |
| Q2/2022 | 912 | +8.3% | – | Meat segment improving profit margins |
| Q3/2022 | 1,037 | +13.7% | – | Winmart starting to become profitable |
| Q4/2022 | 1,215 | +17.2% | – | Masan Consumer strong growth during Tet season |
| Q1/2023 | 1,156 | -4.9% | +37.3% | Seasonal factor after Tet |
| Q2/2023 | 1,327 | +14.8% | +45.5% | Winmart expanding new stores |
Assessment: MSN’s EPS growth trend is very positive with 5/6 quarters showing growth, especially strong increases compared to the previous year. This signals substantial improvement in core business operations, particularly as Winmart turns from loss to profit.
Expert tip: When you discover an EPS growth trend of over 15% year-over-year for 3 consecutive quarters, this is often a signal predicting strong stock price increases in the next 6-12 months.
Method 2: Compare EPS with Industry and Market
EPS alone doesn’t mean much. It needs to be compared with companies in the same industry and the market’s general index for accurate assessment. Below is an example with Vietnam’s banking sector:
| Bank | 2023 EPS (VND) | Growth vs 2022 | Current P/E | Assessment |
|---|---|---|---|---|
| Vietcombank (VCB) | 6,187 | +15.3% | 17.2 | Premium – Best asset quality |
| Techcombank (TCB) | 6,524 | +18.7% | 8.5 | Undervalued – High growth potential |
| MB Bank (MBB) | 4,780 | +10.2% | 7.3 | Undervalued – Expanding insurance segment |
| ACB | 5,112 | +7.5% | 6.8 | Fairly valued – Focus on SME customers |
| Industry Average | 4,230 | +9.8% | 8.9 | – |
Comparative analysis: TCB has the highest EPS in the industry but its P/E is only at industry average, showing potential for revaluation. Conversely, VCB has a P/E nearly double the industry average, reflecting the premium the market is willing to pay for the highest quality bank.
Investment opportunity: When you discover a stock with EPS ≥20% higher than industry average but P/E lower than industry average, this is often a sign of an undervalued stock with price appreciation potential.
Relationship Between Earnings Per Share and Stock Valuation
Understanding deeply what earnings per share is isn’t enough; you need to grasp how EPS directly affects stock value. In Vietnam, there are 3 valuation ratios related to EPS that are most commonly used.
1. P/E Ratio: The Most Common Valuation Tool
P/E = Stock Price ÷ EPS
This ratio tells how much investors are willing to pay for each dong of company profit. In theory, the lower the P/E, the “cheaper” the stock, but reality is much more complex.
In Vietnam, the average P/E during 2020-2024 ranged from:
| Industry | Average P/E | Cyclical Fluctuations | Effective Investment Strategy |
|---|---|---|---|
| Banking | 8-12 | Low when interest rates high, high when interest rates fall | Buy when P/E < 8 and interest rates are falling |
| Retail | 15-25 | Peak in Q4 annually (shopping season) | Buy in Q2 when P/E is low, sell before Tet |
| Technology | 20-30 | Less seasonal fluctuation, depends on technological breakthroughs | Long-term investment based on EPS growth |
| Real Estate | 10-20 | Strong fluctuations in 3-5 year cycles | Buy when P/E < 7 after crisis periods |
| Steel, Oil & Gas | 6-12 | Strong fluctuations following global commodity prices | Apply counter-cyclical strategy |
Important note: Low P/E isn’t always an opportunity! Reasons for low P/E may include:
- Abnormally high EPS due to extraordinary income (asset sales, provision reversals…)
- Market forecasting EPS will decline in near future (industry risks)
- Corporate governance issues causing investors to demand higher “risk premium”
- Low stock liquidity, leading investors to apply “liquidity discount”
2. PEG Ratio: Tool for Balancing Price and Growth
PEG = P/E ÷ Annual EPS Growth Rate (%)
PEG below 1 is usually considered an attractively priced stock. This is a particularly effective tool when comparing companies in the same industry but with different growth rates.
Real example: In 2023, The Gioi Di Dong (MWG) had a P/E of 20, but expected EPS growth rate of 25%/year → PEG = 0.8 → Attractive valuation despite relatively high P/E.
Pocket Option recommends: Prioritize Vietnamese stocks with PEG below 0.9 and stable EPS growth maintained for at least 3 consecutive years.
3. Extended DDM (Dividend Discount Model)
For stocks that pay regular dividends such as banks, utilities, telecommunications… in Vietnam, the DDM method combined with EPS is very effective:
Fair Value = EPS × (1 – b) × (1 + g) / (r – g)
Where:
- b: Retention ratio (profit not distributed as dividends)
- g: Long-term growth rate
- r: Required rate of return
Practical application: For FPT stock with 2023 EPS of 5,511 VND, retaining 40% of profits, expected growth of 18%/year and required return of 25%, the fair value is 86,280 VND – 15% higher than current market price.
5 Limitations of Earnings Per Share That Vietnamese Investors Should Know
Earnings per share is a powerful tool but not perfect. Pocket Option warns of 5 important limitations that Vietnamese investors should note to avoid wrong decisions:
- Can be “beautified” through accounting techniques – Example: Real estate companies delaying provisions, banks’ “creative” debt classification
- Doesn’t reflect cash flow quality – Example: In 2022, HAG had EPS of 1,235 VND but negative cash flow due to capitalized expenses
- Seasonal fluctuations can be misleading – Example: Q1/2023, DGW’s EPS decreased 30% QoQ but this is an annual phenomenon after Q4
- Ignores capital structure and risk – Example: MSN and VNM have equivalent EPS but MSN’s debt/equity ratio is 5 times higher
- Extraordinary income distorts trends – Example: In 2022, VIC’s EPS increased 120% but mainly from divestments, not core business
| Limitation | Manifestation in Vietnam’s Stock Market | Solution |
|---|---|---|
| Accounting manipulations | Some quarterly reports not reviewed/audited | Check asset quality, verify provision expenses |
| Cash flow issues | Especially in real estate, construction, retail | Combine with FCF/Share (Free Cash Flow per Share) analysis |
| Cyclical, seasonal factors | Tourism, retail, F&B, seafood | Use TTM EPS (Trailing 12 Months) instead of single quarter |
| Capital structure risks | Characteristic of conglomerates and real estate | Analyze debt/EBITDA ratio, interest coverage ratio (ICR) |
| Extraordinary income | Common when businesses restructure | Separate “Core EPS” and “Non-recurring EPS” |
Golden tip: Pocket Option recommends the “5-Point EPS Analysis” method – combining 5 analytical dimensions: EPS Growth, EPS Quality, EPS Stability, EPS Predictability and EPS Comparison with the industry.
7 Breakthrough Investment Strategies Based on Earnings Per Share
From experience supporting thousands of Vietnamese investors, Pocket Option has distilled 7 highly effective investment strategies based on EPS, particularly suitable for current market conditions:
Strategy 1: “EPS Momentum” – Getting Ahead of Growth Momentum
Focus on stocks with accelerating EPS growth rates (not just growing but growing faster) for at least 2 consecutive quarters.
Selection criteria:
- Most recent quarterly EPS growing >20% year-over-year (YoY)
- Current quarter EPS growth rate > previous quarter EPS growth rate
- No significant extraordinary income during the reporting period
- Trading volume increases when EPS is announced
Success example: In 2022, DGC stock (Duc Giang Chemical) increased from 60,000 VND to 150,000 VND (+150%) after the company reported 3 consecutive quarters with increasing EPS growth rates from 85%, 120% to 175% year-over-year.
Strategy 2: “Forgotten Value” – Undiscovered Treasure
Look for businesses with strong fundamentals, stable EPS but “forgotten” by the market because they operate in traditional industries or lack attractive factors.
Selection criteria:
- P/E at least 30% lower than industry average
- Stable or slightly increasing EPS for 3 consecutive years
- High dividend yield (>5%/year)
- Low debt/equity ratio (<0.5)
- Consistently high ROE >15%
Typical example: In 2022-2023, DHG (Hau Giang Pharmaceutical) maintained stable EPS around 4,500-5,000 VND/share, P/E only 12-13 times (much lower than pharmaceutical industry average of 18-20 times), 5%/year dividend. In early 2024, the stock rose 40% when the market returned to defensive stocks.
| Strategy | EPS Parameters to Monitor | Suitable Industries in VN | Exemplary Stocks |
|---|---|---|---|
| EPS Momentum | Accelerating EPS growth | Technology, Logistics, Export | FPT, MWG, DGC |
| Forgotten Value | Stable EPS, low P/E | Pharmaceuticals, Food, Utilities | DHG, VNM, POW |
| EPS Recovery Play | EPS beginning to recover after decline | Real Estate, Steel, Oil & Gas | HPG, DXG, PVD |
| Quality Growth | EPS growing steadily 15-25%/year | Banking, Retail, Consumer Goods | ACB, PNJ, MSN |
| Catalyst-driven EPS | EPS expected to surge due to events | All industries | Varies by timing |
Knowing how to calculate earnings per share and apply it to investment strategies is a core skill that differentiates professional and amateur investors in the Vietnamese market. Pocket Option is committed to accompanying you on this journey with in-depth tools and analyses.
Conclusion: Turn Earnings Per Share into Your Competitive Advantage
After deeply exploring what earnings per share is and how to apply it effectively, you now possess a powerful analytical tool that most Vietnamese investors haven’t fully leveraged. Remember that:
- EPS is not just a number – it’s a direct measure of the value you receive with each share you own
- Analyzing EPS trends is more important than absolute value at a single point in time
- EPS quality (from core business activities) is more important than high EPS figures that aren’t sustainable
- Combine EPS with other indicators (P/E, PEG, FCF/Share, ROE) for a comprehensive picture
- The 5-Point EPS Analysis method from Pocket Option helps you analyze comprehensively and make accurate investment decisions
Vietnam’s stock market is increasingly maturing and approaching international standards. In the future, the role of fundamental financial indicators like EPS will become even more important as foreign capital continues to flow into the market and international ETF funds expand their investments.
Pocket Option is committed to continuing to provide in-depth analyses, modern EPS calculation tools, and effective investment strategies to accompany Vietnamese investors on their journey to build sustainable and steadily profitable investment portfolios. Start applying your knowledge about earnings per share today to capture the best investment opportunities in the market!
FAQ
How does basic earnings per share differ from diluted earnings per share?
Basic EPS is calculated based only on the actual number of common shares outstanding. In contrast, diluted EPS calculates the scenario when ALL financial instruments that can be converted to shares are exercised - including options, convertible bonds, and warrants. In Vietnam, the difference between these two indicators is particularly noteworthy for companies that issue many ESOPs such as FPT, Vietjet, or Techcombank, where Diluted EPS can be 5-8% lower than Basic EPS.
Why might a company's earnings per share be high but its stock price doesn't increase accordingly?
This is a common phenomenon in Vietnam's stock market with 4 main causes: (1) The market has already "priced in" expectations of high EPS (as in the case of VHM in 2022); (2) High EPS but poor quality - coming from extraordinary income or creative accounting (like NVL during 2020-2021); (3) Weak cash flow despite good profits (as with many real estate businesses); (4) Negative macroeconomic factors (interest rate increases, credit tightening) causing market-wide P/E contraction, where EPS growth is insufficient to compensate.
How can one distinguish between EPS growth due to core business operations and EPS growth due to unsustainable factors?
Apply Pocket Option's "3-layer analysis" method: (1) Analyze the structure of the income statement, comparing revenue and gross profit growth rates with net profit - if net profit increases much more strongly, be suspicious; (2) Carefully check the financial statement notes, especially the "Other income" and "Profits/losses from associates" sections; (3) Monitor changes in provisions - many Vietnamese companies increase/decrease provisions to adjust profits. A typical example: In 2021, VCB reported a 19% profit increase but mainly due to reduced provisioning, while net interest income only increased by 5%.
When should quarterly EPS be used and when should trailing 12-month EPS be used?
Use quarterly EPS when: (1) Analyzing a company undergoing significant transformation (like MSN during 2021-2023); (2) Evaluating the immediate impact of important events (like HPG after China's reopening); (3) Wanting to capture the latest trends. Conversely, use TTM EPS when: (1) Evaluating highly seasonal companies (like DGW, PNJ, QNS); (2) Comparing with market P/E (VNINDEX P/E is always calculated on TTM); (3) Building a long-term investment portfolio. Golden rule: Use quarterly EPS to detect trends, use TTM EPS to make decisions.
Should stocks be purchased solely based on a company having high EPS and low P/E?
Absolutely not! This is a trap many Vietnamese investors fall into. In the Vietnamese market during 2020-2024, up to 75% of stocks with the lowest P/E ratios (bottom 10%) delivered negative returns. Reasons: (1) Low P/E often reflects high risk or poor prospects that the market has already recognized; (2) High EPS may be temporary due to cyclical factors (like oil & gas, steel); (3) Many "value traps" - companies that appear cheap but are gradually declining. Instead, look for a combination of reasonable P/E (not necessarily the lowest) and sustainable EPS growth, along with good asset quality and corporate governance.
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