Earnings Per Share (EPS) Growth Calculator
Have you entered a stock market? Maybe you have already invested in two or more companies. If so, chances are you own plenty of shares. Perhaps you are wondering how to assess the real value of these companies. The answer is: Use our EPS growth calculator!
You might be wondering: “What is the earnings per share (EPS) growth calculator?” This is what we are going to explore in this article. You will learn how this powerful tool is used in investment strategies. That’s not all.
You can also find out more about earnings per share and EPS growth. Once you understand how they are used, you will be able to identify good investment opportunities and make informed investment decisions. We’ll also cover the EPS growth formula to help you understand how it’s calculated in practice. Let’s get started!
Earnings Per Share (EPS): What Is It?
Before starting to discuss the EPS growth, we should first see what the earnings per share are. EPS is a measure of the company’s profitability per share. It is also known as “net income per share.” So, when talking about earnings per share, we think of the earnings that a company earns for each share of its common stock. It is essentially the net income of a company divided by the number of shares outstanding.
EPS gives an indication of how much an investment in a company will earn in return for each dollar invested, and it is used as one way to compare companies within an industry or sector. The earnings per share can help you pick the company or business that is most profitable. It tells you how much money (profit) an enterprise or firm earns per stock share.
Why Is It Important?
This variable plays an important role in determining whether it’s profitable to invest in a certain stock. The higher EPS values mean that the company is profitable, and vice versa. It should be noted that EPS arrives in a few different forms, including discontinued operations, extraordinary items, as well as on a diluted basis.
Bear in mind that the number of shares outstanding can change over time, and this can affect a company’s EPS. For example, if a company issues more shares, then there will be fewer shares for each shareholder to own. This means that each shareholder now owns a smaller piece of the pie, i.e., fewer earnings. As a result, this will decrease EPS for all shareholders.
How to Find EPS?
The earnings per share (EPS) can be found in the income statement for all the public companies in the United States. When it comes to private companies as well as companies in other countries, it is necessary to check the Profit and Loss (P&L) statement for this information. In this document, you can also investigate how a company’s earnings are generated, beginning with revenues.
Data displayed in the income statement are usually acquired over a period of a few years. This allows you to use and compare EPS values – for instance, 2021 EPS and 2022 EPS values. Our calculator can make it easy to estimate the variation between two or more years.
What Is the Earnings Per Share (EPS) Growth?
Now that you are familiar with the earnings per share, it is time to explain EPS growth too. The EPS growth is a measure of the company’s growth in earnings per share. It is calculated by dividing the company’s earnings per share for the current year by its earnings per share from the previous year. In other words, it’s computed by taking the percentage change in EPS from one period to another and dividing it by the base period EPS.
So, Earnings Per Share (EPS) Growth is intended to measure the increase in earnings for each share. It is defined as the positive difference between the company’s reported earnings of its share values. This metric can tell us how much Earnings Per Share (EPS) has risen over a certain period of time.
For a better understanding of the EPS growth, it is necessary to regard a business as something you put your capital in. As time goes on, it’ll start generating sustainable profit growth. A portion of that profit is used to expand business operations, pay back debts, pay dividends, and so on. The payment to owners is greater if the profits are big. During its existence, every business is supposed to generate an increasing amount of profits. This is where EPS growth comes in.
Equity refers to different things that have to do with the owners, but it comes down to two things: retained earnings and capital invested. Likewise, ROE is a ratio that measures the return on investment. It is calculated by dividing the net income of a company by the shareholders’ equity. In an ideal world, ROE increases when EPS rises. You shouldn’t take this for granted, though, as this isn’t always the case.
What Is EPS Growth Rate or EPS CAGR?
The EPS growth rate is a measure of the percentage change in the earnings per share (EPS) of a company over a period of time. It shows how quickly the earnings per share grow over time. To calculate the EPS growth rate, you need to know the EPS value at the end and beginning of the same period. Investors use it to determine whether the companies are overvalued or undervalued.
It is important to point out that the time span is one of the key points when this rate is analyzed. The EPS growth rate mostly relies on the PEG ratio method. It also utilizes the CAGR concept. CAGR is an acronym for ‘compound annual growth rate’. It is used to measure how much an investment has grown over time. The CAGR formula takes into account any dividends and interest payments, as well as capital gains or losses, and calculates them all together.
EPS Growth Formula: How to Calculate It?
When calculating the EPS growth rate, you should use the formula below:
EPS Growth = (EPS Current year – EPS Previous year) / EPS Previous year
For example, if the EPS value for the previous year is $53,000 while the EPS for the current year is $100,000, then the earnings per share growth would be 88.68%.
EPS Growth = (100,000 – 53,000) / 53,000
EPS Growth = 47,000 / 53,000
EPS Growth = 0.88679 * 100%
EPS Growth = 88.68%
Enter your own values in the appropriate fields of our calculator and compute the EPS growth in a matter of seconds. Give it a try!