How to Calculate EPS Growth Rate

Increasing EPS leads to higher stock prices.

Increasing EPS leads to higher stock prices.

Earnings per share (EPS) measures the profits of a company for each share of stock issued. Generally, the higher the EPS, the better a company is performing. Over time, investors want to see the EPS increasing relative to the stock price. To measure the growth rate of the EPS for a company, you need to know the EPS at the start and end of the time period over which you want to measure the growth.

Subtract the beginning EPS from the ending EPS to calculate the change in EPS. For example, if you are measuring the EPS growth rate from year one to year two, subtract the EPS from year one from the EPS for year two. If the EPS grew from $1.20 to $1.50, subtract $1.20 from $1.50 to get 30 cents.

Divide the change in EPS by the beginning EPS to calculate the growth rate as a decimal. In this example, divide 30 cents by $1.20 to get 0.25.

Multiply the EPS growth rate as a decimal by 100 to convert the growth rate to a percentage. In this example, multiply 0.25 by 100 to find the EPS growth rate: 25 percent.

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Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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