I was reading through the PFIE that other night and I noticed a couple of things that I hadn’t thought about previously.
When PFIE (and all other companies?) report EPS, the share count that they use is a weighted average of the shares in the period covered in the report. In many/most cases, this should be fine and give an accurate reflection of the share count at the end of the period. However, if there was dilution near the end of the period then the weighted average can be different from the actual share count at the end of the period. In this case, EPS would be overstated. Personally, I think it would be better to divide earnings by the actual share count at the end of the period rather than using a weighted average. In the future, we should consider making an adjustment to the adjusted earnings when a company has a large dilution near the end of a reporting period. We could simply divide the earnings by the actual diluted share count at the end of the period rather than weighted average.
In the PFIE report it appeared to me that not all of the granted stock options were counted in the fully diluted number. I’m not sure how companies arrive at their fully dilution share counts. Anyone know?