EPS Growth
EPS growth refers to the growth rate of earnings per share (EPS) of a company over a period of time. EPS refers to the net income available to common shareholders per share and is an important indicator of a company's profitability. The EPS growth rate can reflect the improvement of a company's profitability, and a higher EPS growth rate is usually considered as a good performance of a company's profitability.
Definition: Earnings Per Share (EPS) Growth Rate refers to the rate at which a company's EPS increases over a period of time. EPS represents the net earnings available to common shareholders per share and is a crucial indicator of a company's profitability. A higher EPS growth rate typically indicates an improvement in the company's profitability.
Origin: EPS as a financial metric was introduced in the early 20th century to measure a company's profitability. With the development of capital markets, investors and analysts have recognized the importance of the EPS growth rate, as it reflects not only the current profitability but also the potential for future earnings.
Categories and Characteristics:1. Historical EPS Growth Rate: Calculated based on past EPS data (e.g., the last five or ten years), reflecting the company's historical earnings growth. 2. Forecasted EPS Growth Rate: Based on analysts' predictions of the company's future earnings, reflecting market expectations of future profitability.
Characteristics: Historical EPS growth rate helps investors understand past performance, while forecasted EPS growth rate is more forward-looking and can guide investment decisions.
Specific Cases:1. Case One: A tech company had EPS of $1.00, $1.20, $1.50, $1.80, and $2.10 over the past five years. The average annual EPS growth rate over these five years is 20%, indicating a significant improvement in profitability. 2. Case Two: A retail company had EPS of $2.00, $2.10, and $2.30 over the past three years. Although its EPS is growing, the growth rate is low, with an average annual growth rate of only 5%, suggesting limited earnings growth potential.
Common Questions:1. How to calculate the EPS growth rate? The formula is: EPS Growth Rate = (Current Period EPS - Previous Period EPS) / Previous Period EPS × 100%. 2. Is a higher EPS growth rate always better? While a higher EPS growth rate generally indicates good profitability, excessively high growth rates may be unsustainable. Investors should analyze other financial metrics for a comprehensive assessment.
