Earnings Per Share (EPS) Growth Calculator
The 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 Are the Earnings Per Share?
In a nutshell, earnings per share (EPS) is the total profit of a company (also called net income) divided by the number of shares a company has. It represents a key value for investors since it can help you relate how much earnings correspond to you, accordingly, to the shares you have.
It should be clear already that the EPS can be grown by increasing the net income margin or by reducing the number of shares. For a company, showing high EPS relative to its share price can attract new investors that can fund expansion projects and make the company earn even more money.
The basic EPS formula is:
EPS = Net Income / Number of Shares Outstanding
You can find the earnings per share in the income statement of any public company. For private companies or in different countries, the same document can be called the Profit and Loss statement (P & L). There you will also see how a company gets its earnings starting from its revenues.
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, 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.
How to Calculate the EPS Growth?
The EPS growth formula is:
EPS Growth (%) = ((Current EPS − Previous EPS) / |Previous EPS|) × 100
Where:
- Current EPS — earnings per share for the most recent period
- Previous EPS — earnings per share for the earlier period (denominator must not be zero)
- The absolute value |Previous EPS| handles negative EPS correctly
For example, if a company reported EPS of $1.25 last year and $2.50 this year:
EPS Growth = (($2.50 − $1.25) / $1.25) × 100 = +100%
What Is the EPS CAGR (EPS Growth Rate)?
The EPS CAGR (Compound Annual Growth Rate) — also known as the EPS growth rate — measures how quickly EPS grows on an annualized basis over multiple years. Unlike simple EPS growth (which only looks at two points), CAGR smooths out year-to-year volatility and gives a more accurate picture of long-term performance.
How to Calculate the EPS Growth Rate (CAGR)?
The EPS CAGR formula is:
EPS CAGR = (Current EPS / Beginning EPS)1/n − 1
Where n is the number of years between the two EPS values.
For example, if EPS grew from $1.00 to $2.59 over 5 years:
EPS CAGR = ($2.59 / $1.00)1/5 − 1 = 2.590.2 − 1 ≈ +21% per year
Note: EPS CAGR is only calculated when both EPS values are positive and the period spans more than one year.
How to Use the Earnings Per Share Growth Calculator?
- Select your currency — choose from USD, RUB, EUR, GBP, JPY, and 25 other world currencies.
- Choose a number format — American (1,234.56) or Metric (1 234,56).
- Enter Previous EPS — the EPS from the earlier reporting period (e.g., last year). Can be negative for loss companies.
- Enter Current EPS — the EPS from the most recent reporting period.
- Enter the number of years — the time span between the two EPS values (default is 1 year). Used to calculate the CAGR.
- Click Calculate — get the EPS change, EPS growth %, and EPS CAGR instantly.
Usually, the income statement shows data obtained over several years. You can use such values (for example, 2023 EPS value and 2019 EPS value) and calculate their variation with a 4-year period to get the annualized growth rate.
What Is a Good EPS Growth Rate?
What constitutes a "good" EPS growth rate depends on the industry, company size, and economic conditions. Here are general benchmarks:
| EPS Growth Rate | Interpretation |
|---|---|
| Negative → Positive | Turnaround — one of the strongest signals; the company reversed a loss to profit |
| > 25% per year | Outstanding — typical of high-growth companies (tech, biotech). Sustainable over long periods is rare. |
| 15% – 25% per year | Strong Growth — significantly above average; a hallmark of quality growth stocks |
| 5% – 15% per year | Moderate Growth — solid and sustainable; typical for established, well-run companies |
| −5% – 5% | Flat — company is treading water; watch for trends over multiple years |
| −15% – −5% | Slow Decline — warrants investigation; could be cyclical or structural |
| < −15% | Declining — significant red flag; requires deeper analysis before investing |
Warren Buffett famously looks for companies with consistent EPS growth of 15% or more per year over 10+ years — a hallmark of compounding machines.
EPS Growth vs EPS CAGR — Key Differences
| Metric | Formula | Best Used For |
|---|---|---|
| EPS Growth (%) | (Current − Previous) / |Previous| × 100 | Short-term comparison between two periods |
| EPS CAGR (%) | (Current / Previous)1/n − 1 | Long-term annualized growth rate (n > 1 year) |
FAQs
What does negative EPS growth mean?
Negative EPS growth means the company's earnings per share declined compared to the previous period. This could be due to falling revenue, rising costs, one-time charges, or economic downturns. It is a warning signal but not necessarily a reason to sell — context matters greatly.
Can I calculate EPS growth if the previous EPS was negative?
Yes, our calculator handles negative EPS values. When previous EPS is negative and current EPS is positive, it signals a turnaround — typically a very bullish event. If both periods show negative EPS, the growth percentage indicates whether losses are getting smaller (improving) or larger (deepening).
What is the difference between EPS growth and revenue growth?
Revenue growth measures the increase in total sales, while EPS growth measures the increase in profit per share. A company can grow revenue while EPS shrinks (if margins compress or share count rises). EPS growth is generally considered a more important metric for shareholders because it directly reflects per-share value creation.
How often is EPS reported?
Public companies in the U.S. report EPS quarterly (Q1, Q2, Q3, Q4) and annually. Investors often track both quarterly growth (year-over-year) and annual EPS CAGR over 3, 5, or 10-year periods to assess long-term quality.
What EPS growth rate is needed to double earnings in 5 years?
Using the rule of 72: 72 / 5 = 14.4% per year. More precisely, you need an EPS CAGR of approximately 14.87% per year to double EPS in exactly 5 years (2^(1/5) − 1 ≈ 14.87%).