REFS is
a mine of invaluable information for the private investor.
Selecting shares without its help is like trying to
clap with one hand tied behind your back.
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Adjustments
The figures
for both earnings and the number of shares can be subject to
adjustment for a variety of reasons which fall into the following
four categories:
- Non-trading
and exceptional profits/losses.
The forecast
results almost certainly exclude the effect of any future exceptional
or non-trading events. Because of this, the reported historic
earnings are adjusted to a normalised basis. This provides a
realistic base with which EPS estimates for the following two
periods can be compared, and EPS growth can be measured. Historic
normalised earnings are calculated by excluding any exceptional
or non-trading profits and losses. The methodology is fully
explained in calculating normalised and IIMR earnings.
- Share
capital changes
If a
change in share capital
gives rise to a share price adjustment factor, the factor is
applied to restore comparability between EPS figures from different
time periods. Examples include rights issues, scrip issues,
and share consolidations or subdivisions.
- Annualisation.
Adjustments
to annualise the last
reported EPS are necessary when the period is greater or less
than 12 months in duration.
- Notional
dilution
EPS is
shown on a fully-diluted basis. This assumes, notionally, that
any known future possible share issues, which would take place
upon conversion of other classes of debt or share capital, have
already occurred. Further adjustments are made to reflect, for
example, lower dividend or interest payouts, or an increased
earnings capacity arising through a larger capital base. See
notional dilution
for further explanation.
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