EPS Growth Rate Calculator
Calculate the Earnings Per Share growth rate—one of the Big 5 numbers for evaluating wonderful companies.
EPS Growth Rate
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Formula
What is EPS Growth Rate?
Earnings Per Share (EPS) growth rate measures how quickly a company's earnings are growing on a per-share basis. It's one of the five key metrics (the "Big 5") that Rule #1 investors use to determine if a company is a wonderful business.
Rule #1 Guideline
Look for companies with EPS growth of 10% or higher consistently over the past 10 years. This indicates the business has a durable competitive advantage.
Why EPS Growth Matters
- • Predictability: Consistent EPS growth suggests a predictable, well-managed business.
- • Compounding: Growing earnings compound over time, increasing shareholder value.
- • Valuation: EPS growth rate is used to project future earnings and calculate sticker price.
Where to Find EPS Data
You can find historical EPS data on financial websites like Yahoo Finance, Morningstar, or the company's annual reports. Look for the "diluted EPS" figure for the most accurate 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, ROIC, equity growth, and free cash flow are other measures of a company's financial status.
Frequently Asked Questions
How accurate is the EPS Growth Rate Calculator?
Our calculator uses standard EPS growth rate formulas and up-to-date financial data for accuracy. Double-check your EPS numbers for consistency.
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.
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 can drive a higher share price and better price-to-earnings (P/E) ratios. 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 for a more accurate picture.
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.
Calculate Equity Growth →
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