Compute EPS growth using CAGR between a start and end EPS, and analyze year-by-year growth with an assumed constant growth rate. Enter EPS values directly or derive them from net income and shares outstanding.
| Year | Projected EPS |
|---|
Earnings per share (EPS) growth measures how a company’s earnings attributable to each share change over time. Analysts often use CAGR to understand the long‑term, compounded growth rate between a starting EPS and an ending EPS.
CAGR = (End / Start)^(1 / Years) − 1
CAGR smooths volatility and shows the steady rate required to grow from Start to End over a given number of years.
YoY Growth = (Current EPS − Prior EPS) / Prior EPS
Use YoY to evaluate short‑term momentum, and CAGR for multi‑year trends.
Suppose EPS grew from 2.00 to 3.50 over 5 years.
CAGR ≈ 11.85% per year.
Not necessarily. Growth driven by one‑offs or heavy buybacks without cash‑flow support can be low quality. Cross‑check with margins, free cash flow, and leverage.
CAGR shows the compounded rate over a period; average YoY can be skewed by volatility. Use CAGR for long‑term perspective.
CAGR is not defined across negative values. Consider normalizing periods, using operating metrics, or waiting until EPS turns positive.
Compute earnings per share directly
Relate price to earnings power
Valuation adjusted for growth
General CAGR across metrics
Value cash flows with growth
Model income and reinvestment
