EPS Growth Rate Calculator
Calculate the earnings per share growth rate between two periods, or project future EPS using a compound annual growth rate (CAGR).
How to use this tool
- Enter current (latest) eps, previous (prior period) eps and number of years (for cagr) in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your eps growth rate and the full breakdown beneath it.
⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.
Formula
Year-over-year growth: g = (EPScurrent − EPSprior) / |EPSprior| × 100
CAGR over n years: CAGR = (EPScurrent / EPSprior)1/n − 1
How it works
The simple EPS growth rate measures the percentage change in earnings per share from one period to the next, capturing short-term earnings momentum. The CAGR smooths growth over multiple periods, giving the steady annual rate that would produce the same cumulative change, making it useful for comparing companies with different growth trajectories over time.
Worked example
EPS growth from $4.50 to $5.25
- Current EPS = $5.25; Previous EPS = $4.50
- EPS change = $5.25 − $4.50 = $0.75
- Growth rate = $0.75 / $4.50 × 100 = 16.67%
- For 1-year period, CAGR equals the annual growth rate = 16.67%
EPS Growth Rate = 16.67%
Common mistakes to avoid
- Calculating growth rate from a negative base-year EPS — dividing by a negative number produces a misleading or inverted growth rate; year-over-year change is not meaningful when the prior period is a loss.
- Confusing simple year-over-year growth with CAGR when spanning multiple years — simple growth over multiple years overstates the annualized rate if there is volatility.
- Ignoring the effect of share buybacks on EPS growth — EPS can grow even when net income is flat or declining if the share count falls through repurchases, giving a misleading impression of earnings expansion.
Key terms
- Why is EPS growth important?
- EPS growth indicates whether a company is becoming more profitable per share over time and is a key driver of stock price appreciation.
- What is a healthy EPS growth rate?
- Growth above 10–15% annually is generally considered strong, though acceptable rates vary significantly by industry and economic cycle.
- How is EPS CAGR different from YoY growth?
- Year-over-year growth compares just two consecutive periods, while CAGR calculates the equivalent smooth annual rate over a multi-year period, reducing the impact of volatile years.
Frequently asked questions
- What is a healthy EPS growth rate?
- There is no universal benchmark — it depends on industry, size, and cycle. A commonly cited rule of thumb is that sustainable EPS growth equals a company's long-term return on equity times its retention ratio (1 - payout ratio).
- How does share dilution affect EPS growth?
- Dilution (issuing new shares) increases the denominator and reduces EPS growth, or can turn positive earnings growth into negative EPS growth. Always check whether share count changes are driving the EPS trend.
- Why use CAGR instead of average annual growth rate for EPS?
- CAGR accounts for compounding and gives the single steady rate that would produce the same start-to-end result, making it more accurate than averaging annual rates when EPS fluctuates.