Trailing EPS

Trailing EPS is a company's earnings per share generated over a prior period. This period is commonly the most recently completed fiscal year; these may be considered trailing EPS. However, the term "trailing" often implies a value calculated on a rolling basis. That is, trailing EPS may describe the most recent 12-month period. These earnings per share will change each month as the nearest month is added to the calculation and the most distant month is dropped.

The descriptive word "trailing" implies "previous years" versus a present or forward EPS. Most recorded and quoted EPS values are trailing.

A trailing EPS often uses the previous four quarters of earnings in its calculation and has the benefit of using actual numbers instead of projections. Most price to earnings ratios (P/E) are calculated using the trailing EPS because it represents what's actually happened, and not what might happen. Although the figure is accurate, the trailing EPS is “old news,” and many investors will also look at current and forward EPS figures.

Trailing EPS does enable trend analysis. Analysts will commonly compare different quarters on a trailing basis while keeping a close eye on a particular quarter. For instance, the fourth quarter for a retailer (Christmas and Holiday season) is particularly important. Analysts will compare fourth-quarter year-over-year changes in key fundamentals, while also comparing the trailing 12-month results for these periods.

Many online and free financial resources, such as Yahoo! Finance, will report trailing EPS for publicly traded equity securities.