PDSnet Glossary

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Name	synonyms = 1, variations = 2, abbreviations = 3

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Definition

The company's earnings before the deduction of Companies tax. For example, Dischem in their results for the year ended 29th February 2020 disclosed a pre-tax profit of R868,8m and taxation of R240,6m which left them with an after tax profit of R628,2m. This works out to an effective taxation rate of 27,69% - slightly lower than the normal company tax rate of 28%, at the time. In general, it is always worth calculating the percentage tax rate that a company has paid. If it is significantly below the normal tax rate, then they have taken advantage of various initial and investment allowances in the Income Tax Act which are unlikely to be repeated. This probably means that their profits are higher than normal in the current year and they will revert to the normal tax rate in the next year. Something like this can have a significant impact on their earnings per share (EPS) and hence on their earnings yield (EY) and their price:earnings multiple (P:E).

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