What is Rolling EPS?
The rolling EPS is a variation of the earnings per share (EPS) metric which measures a company's profitability.
How Does Rolling EPS Work?
The rolling EPS is measured on the basis of a year and is calculated by adding a company's EPS from the two previous quarters to the projected EPS for the two upcoming quarters. For instance, if a company had respective EPS values of five dollars per share and four dollars per share in the previous two quarters with projected EPS values of five dollars per share and six dollars per share for the two following quarters, respectively, the company's rolling EPS would be $20 per share (($5 + $4) + ($5 + $6) = $20). It is important not to confuse rolling EPS with trailing EPS, which is calculated by adding the EPS values for the four previous quarters.
Why Does Rolling EPS Matter?
The rolling EPS measures a company's profitability on the basis of current as well as forecasted earnings. In this sense, it provides a current, or dynamic, measure of profitability. Investors and analysts should be mindful that two of the components are speculative and may render the rolling EPS value inaccurate should the outcomes differ significantly from the estimates.