This free online Stock Growth Rate Calculator will calculate the annualized percentage growth of a company's earnings per share over time.
If you don't know the answer to the question, "What is Growth Rate?", it may help to read the following explanations related to what growth rate is and what its uses are -- before using the stock growth rate calculator.
In the case of stocks, growth rate refers to the compounded percentage by which a company's earnings grows over time. But because company earnings rarely ever grow at a constant percentage increase, in order arrive at a meaningful growth comparison figure, a rather complex algorithm must be employed.
I'll spare you the "al-gory" details, except to say that the algorithm basically engages in a process of "keep guessing at what annualized rate of return would cause the beginning EPS to grow to the ending EPS in the specified number of periods." This process of guessing (iterations) continues until the algorithm either finds a match within the specified tolerance, or until the maximum number of guesses is exceeded (the stock growth rate calculator has a tolerance of .000001 and is set not to exceed 1 million guesses).
One popular use of stock growth rate figures is for comparing one company's earnings increases to those of another company. Because the earnings increases are rarely ever constant it becomes difficult to compare the two. However, once you know the annualized growth rates the companies, you then have a meaningful yardstick for determining which company's earnings is growing at a faster pace.
Another popular use of stock growth rate figures is for calculating the expected rate of return on a stock investment. In this case, a company's historical growth rate is used in combination with other measurements (current price and dividend) to estimate the future expected rate of return for a stock investment.
You can usually find everything you need (periodic EPS figures) by going to the company's website and clicking on Financial Statements.
With that, let's use the Stock Growth Rate Calculator to calculate the annualized growth rate of a company's earnings, which can then be used for comparison purposes, as well as for calculating expected rate of return.
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Beginning earnings per share: Enter the earnings per share (EPS) from the period you wish to begin to calculate stock growth rate from.
Ending earnings per share: Enter the current or ending earnings per share (EPS).
Earnings per share (EPS): The amount of a company's earnings allocated to each share of common stock outstanding. EPS is calculated by subtracting the preferred dividends paid from the net income, and then dividing that result by the average number of common shares outstanding. Of course, you can always use the handy EPS Calculator to save you from doing the manual calculations.
Number of years: Enter the number of years between the starting and ending earnings per share entries made in the previous two input fields. If you want to enter monthly, quarterly, or semi-annual EPS figures instead of annual EPS figures, feel free. Just remember to multiply the result by the number of periods per year in order to arrive at the annualized compounded growth rate.
Stock growth rate: Based on your entries, this is the growth rate of the stock for the period between the beginning and ending EPS entries. If the EPS figures you entered represent years, the result would also represent the annualized growth rate. If you entered EPS figures for periods of less than one year, you will need to multiply the result by the number of periods per year in order to arrive at the annualized growth rate.