Earnings Per Share Growth Calculator
Table of contents
What are the earnings per share?How to find earnings per share?What is the EPS growth?How to calculate the EPS growth?What is the EPS CAGR, also known as EPS growth rate?How to calculate EPS growth rate?How to use the earnings per share growth calculator?FAQsThe earnings per share growth calculator is a fundamental tool in your investment strategy. By understanding and using the earnings per share growth and the EPS growth rate, you can spot great investment opportunities that can return 100% or more. In this article, we will explore what EPS growth is, how to calculate the EPS growth rate, and see a real example of what is a good EPS growth rate.
What is the EPS growth?
EPS growth refers to the positive change between earnings per share values reported by the company. In other words, it refers to how much EPS has increased over a defined amount of time.
To clearly understand the meaning of EPS growth meaning, you have to picture a business like a machine in which you put capital (ideally, only once). In time, it will generate profits that can be sustained over time. From such profits, the business needs resources for paying off debts, expanding its operations, and paying dividends to the owners, among other activities.
The bigger the profits, the bigger the payment to owners. Thus, it is of utmost importance for this machine to produce more and more profits during the time it exists. That is why EPS growth is so significant.
All which corresponds to the owners (capital invested and retained earnings) is called equity. Consequently, a way to measure the return of the business compared to the investment of the owners is by using the return on equity calculator. Ideally, if EPS grows, ROE grows, but be careful; it does not always happen.
How to calculate the EPS growth?
The EPS growth formula is:
where:

$\footnotesize \rm {EPS_{final}}$ — Most recent earnings per share data between the two chosen periods; and

$\footnotesize \rm {EPS_{initial}}$ — Older earnings per share data between the two chosen periods.
Of course, as long as our earnings per share growth calculator gives a positive EPS growth %; we can say the earnings per share are increasing.
What is the EPS CAGR, also known as EPS growth rate?
The EPS growth rate is the speed at which the earnings per share are growing. It uses the same concept as CAGR calculator, and that is why it is also known as EPS CAGR.
Calculating EPS growth is critical for investors since it can determine if the company is undervalued or overvalued. One of the methods that includes the EPS growth rate is the PEG ratio.
A key point when analyzing the EPS growth rate is the time span. A company that can only sustain 20% EPS CAGR over three years and then stagnates is at an inferior level compared to a company that can sustain 15% EPS CAGR over five years. The latter has the opportunity to compound more times.
Using the EPS growth rate formula (see below), we find out that to grow EPS at 20% over three years equals increasing it 1.73 times; meanwhile, to grow the same EPS at a 15% compound annual rate over five years equals double it. You can verify it in our intelligent earningspershare growth calculator, too.
How to calculate EPS growth rate?
In this section, we will explore the math and a real example. The EPS growth rate formula is:
where:
 $\footnotesize n$ — Number of periods; and
 $\footnotesize \rm {\Delta EPS}$ — Difference between $\footnotesize \rm {EPS_{final}}$ and $\footnotesize \rm {EPS_{initial}}$. See the last section for their definition.
The number of periods refers to all the periods that have passed between the two dates. For instance, if we want to analyze the growth rate between 2017 and 2020, we will consider three periods: 2017 to 2018, 2018 to 2019, and 2019 to 2020. We will further cover the number of periods in the next section.
What are the differences between revenue vs. earnings?
Revenues refer to all the money a company receives to provide services or sell a product. This money has to cover manufacturing costs, selling costs, etc., to be called a profit. Earnings or profits are the money left after covering all expenses related to business operation, all money needed to produce the goods sold, taxes, and any interests from debts. In a nutshell, earnings are the money left after paying for the operations and any other financial obligation.
What is a good EPS growth rate?
An EPS growth rate more prominent than 15% over more than three years is usually an excellent choice; however, we must avoid paying in excess for such strong growth stocks. Consequently, we have to compare it with its price. A pretty famous method to use is to have the PEG ratio less than or equal to 1. Then, we will have a price/earnings ratio less than or equal to the growth rate.
What is the meaning of EPS growth?
EPS growth refers to the positive change between earnings per share values reported by the company. In other words, it refers to how much EPS has increased over a defined amount of time. Market sentiment tends to be very positive in these cases. Whenever the change is a reduction, we have EPS shrinkage, which is almost always taken as a bad sign by the market.
How to find EPS growth rate?
To find the EPS growth rate, you have to:

Find the company's annual report, a.k.a. the 10K.

Find the income statement or profit & loss statement.

After net income, locate diluted earnings per share. Notice how it is presented next to last year's information, and in several cases, the year before is also included.

Define the periods of analysis you will cover. For example, 20152020 (6 periods).

Get the initial and final earnings per share (EPS). Considering the abovementioned periods, you would need 2015 EPS & 2020 EPS.

Use our earnings per share growth calculator and input the earliest EPS data, the latest EPS data, and the number of periods in between.