Growth Rate in Earnings per Share

The Earnings Per Share (EPS) growth rate is expressed as a percentage and shows the annualized rate of growth of EPS.

Formula:
EPS Growth Rate = (EPS at end - EPS at beginning) / EPS at beginning

Example 1:
The common stock of Company B has an EPS of $1.50 in Year 1, and $2.00 in Year 2. Thus, the change in EPS = 2.00 - 1.50 = $0.50, and then you simply divide the change in EPS by the earnings per share at beginning to get the Earnings Per Share growth rate:
(0.50 / 1.50) * 100% = 33.33%

Example 2:
Following are the earnings per share for the past 4 years:
2007 - $0.30
2008 - $0.55
2009 - $0.80
2010 - $1.00
Calculate the earnings per share growth rate.

Solution:
Year 2008 = (0.55 - 0.30) / 0.30 = 83.3%
Year 2009 = (0.80 - 0.55) / 0.55 = 45.5%
Year 2010 = (1.00 - 0.80) / 0.80 = 25%

* Next: How to Calculate Earnings Per Share (EPS)

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Kelvin Wong Loke Yuen is an experienced writer with a strong background in finance, specializing in the creation of informative and engaging content on topics such as investment strategies, financial ratio analysis, and more. With years of experience in both financial writing and education, Kelvin is adept at translating complex financial concepts into clear, accessible language for a wide range of audiences. Follow him on: LinkedIn.

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