EPS Growth Rate Calculator
EPS is one of the "Big 5 Numbers" required to determine whether a company is a wonderful business. Earnings per share (EPS) represent a company's net income divided by its weighted average shares outstanding over a fiscal year. The EPS growth rate measures how much a company's profitability has improved over a given period and is monitored very closely by Wall Street. This makes it a vital financial metric for investors.
What You Need Before You Start
To use the EPS Growth Rate Calculator, gather:
Current EPS
Most recent annual or TTM earnings per share figure (Rule #1 prefers diluted EPS).
Initial EPS
EPS from your starting year (ideally 8–10 fiscal years ago).
Number of Years ("Age")
The period between the initial and current EPS values.
Where to Find EPS Data
- Check annual reports, the income statement, or trusted sources like www.easyst.com.
- Look for the weighted average number of shares outstanding and net income on the income statement.
- Ensure you account for factors like preferred dividends, stock splits, reverse splits, and share issuances over time.
Tip: Always use the same Per Share basis (basic or diluted) for starting and ending values. Consistency is key.
Rule #1 EPS Growth Rate Calculator
Ready to calculate your company's EPS growth? Our tool is designed for all investors. No advanced math or financial background required. Just enter your numbers and instantly see your company's EPS growth rate.
EPS Growth Rate
0%
At Rule #1, we emphasize EPS growth as one of the "Big 5 Numbers" for evaluating a company's financial health. Consistent EPS growth signals that a company is generating higher earnings. It tells you whether a company is increasing shareholder value. Our mission is to make these advanced financial metrics accessible. So every investor can confidently analyze a company's income statement and spot true value.
Start using the EPS growth rate calculator to analyze your next investment.
How to Calculate EPS Growth Rate (Step-by-Step)
There are two main ways to calculate EPS growth:
Simple EPS Growth Formula
Compound Annual Growth Rate (CAGR) Formula
Use the simple growth rate for a quick snapshot, or CAGR for a more accurate view over multiple years. Both formulas help you calculate earnings growth and understand a company's earnings performance.
What Is a "Good" EPS Growth Rate?
A "good EPS growth rate" depends on the industry and economic conditions.
Rule 1 generally looks for consistent, above-average growth, often 10% or higher over a given period. Compare your results to other companies in the same industry and historical averages for context. Consistent, robust EPS growth often signals that a company's share price and profitability are trending upward. This makes it a strong candidate for investment.
Example:
Suppose a public company's EPS increased from $0.60 to $1.90 over 8 years. This rise occurred despite issuing new common shares and undergoing a stock split. Using the calculator, you'd see a robust growth rate. However, a deeper look at the income statement and balance sheet would confirm the company's true profitability. It will also show if its growth was sustainable. Of note is that the company will restate historical EPS financial statement values in the event of a stock split, so you just want to confirm you are using split adjusted values as part of this calculation.
Red Flags and Pitfalls to Watch For
EPS growth can sometimes be misleading. Watch out for:
Share buybacks
Can artificially boost EPS by reducing the number of outstanding shares.
One-time events
Unusual gains or losses may distort true performance.
Accounting changes
Adjustments to diluted earnings or convertible debt reporting can impact EPS figures.
Preferred stock or dividends
Subtract preferred dividends from net income to calculate earnings per share for common shareholders.
Pro tip: Don't rely solely on EPS growth. Analyze it alongside other financial metrics for a well-rounded view. For example, Sales Growth, Equity Growth, Operating Cash Flow Growth, and Free Cash Flow Growth are other measures of a company's financial status.
Frequently Asked Questions
How accurate is the EPS Growth Rate Calculator?
Our calculator uses standard Compound Annualized Growth Rate (CAGR) formulas to determine the Growth Rate value.
What if my EPS numbers are negative?
Negative EPS means the company isn't profitable. Investigate the reasons using the income statement and look for signs of turnaround. CAGR's cannot be calculated with negative numbers.
Where can I find reliable EPS data?
Annual reports, SEC filings, and trusted finance sites provide EPS figures, net income, and shares outstanding.
How does Earnings Per Share growth relate to stock price and valuation?
Sustained EPS growth tends to drive higher price-to-earnings (P/E) ratios which result in higher per share prices for the company. However, always consider valuation and other metrics before deciding where to invest.
Can I use this Earnings Per Share calculator for international companies?
Yes, as long as you have consistent, reliable EPS data in the same currency and fiscal year.
What are the limitations of EPS as a metric?
EPS can be affected by stock splits, share buybacks, diluted basis calculations, and accounting changes. Use it with other financial metrics such as the other Big 5 Numbers to help ensure financial statement manipulation is not occurring.
Next Steps
If these numbers are in line with Rule #1 requirements after you calculate EPS, move on to the Equity Growth Rate Calculator to finish determining if this business is right for you.
Equity Growth Rate
This calculates the rate at which a company has grown its Equity.