Continuing and Discontinued Basic EPS
Reading Basic EPS when business segments are sold or shut down
Continuing and Discontinued Basic EPS separates a company’s Basic Earnings Per Share into two parts: what comes from the ongoing business (continuing operations) and what comes from businesses that were sold or exited (discontinued operations). This split helps you avoid treating one-time disposal gains or losses as if they were repeatable earnings.
How to Interpret the Split
- Basic EPS (Continuing Operations): per-share profitability from the business that remains in place.
- Basic EPS (Discontinued Operations): per-share impact from an exited segment, including operating results up to disposal and disposal gains/losses (net of tax).
- Basic EPS (Total): the combined per-share result.
Why Analysts Care
Valuation and forecasting typically focus on continuing operations, since discontinued operations are not expected to recur. The separate presentation prevents distorted trend analysis, especially in years with large disposal gains or restructuring losses.
Common Pitfalls
- Using total EPS in a P/E multiple when a large one-time disposal gain inflated earnings.
- Ignoring taxes: discontinued operations are usually shown net of tax.
- Forgetting the denominator: this is still basic shares, not diluted.
Key Takeaways
This metric separates Basic EPS into continuing and discontinued components.
Analysts usually value the business using continuing operations EPS.
Discontinued operations can include one-time gains/losses that distort total EPS trends.
Continuing and Discontinued Basic EPS
Reading Basic EPS when business segments are sold or shut down
Continuing and Discontinued Basic EPS separates a company’s Basic Earnings Per Share into two parts: what comes from the ongoing business (continuing operations) and what comes from businesses that were sold or exited (discontinued operations). This split helps you avoid treating one-time disposal gains or losses as if they were repeatable earnings.
Table of Contents
How to Interpret the Split
- Basic EPS (Continuing Operations): per-share profitability from the business that remains in place.
- Basic EPS (Discontinued Operations): per-share impact from an exited segment, including operating results up to disposal and disposal gains/losses (net of tax).
- Basic EPS (Total): the combined per-share result.
Why Analysts Care
Valuation and forecasting typically focus on continuing operations, since discontinued operations are not expected to recur. The separate presentation prevents distorted trend analysis, especially in years with large disposal gains or restructuring losses.
Common Pitfalls
- Using total EPS in a P/E multiple when a large one-time disposal gain inflated earnings.
- Ignoring taxes: discontinued operations are usually shown net of tax.
- Forgetting the denominator: this is still basic shares, not diluted.
Key Takeaways
This metric separates Basic EPS into continuing and discontinued components.
Analysts usually value the business using continuing operations EPS.
Discontinued operations can include one-time gains/losses that distort total EPS trends.
Related Terms
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