How Do You Calculate EPS Growth Rate?
EPS stands for earning per share. Earnings per share is calculated by subtracting preferred dividends from net income, then dividing by the weighted average of common shares outstanding during the year. EPS shows the amount of earnings available to common shareholders. A firm’s income statement will disclose the firm’s EPS. Find a firm’s EPS for the current year and the prior year. This firm must disclose this information on the income statement. For example, Firm A has an EPS of $2.90 at the end of Year 1, then has an EPS of $3.10 at the end of Year 2. Subtract the current year’s EPS from the prior year’s EPS. In the example, $3.10 minus $2.90, which equals $0.20 Divide the answer in Step 2 by the prior year’s EPS. In the example, $0.20 divided by $2.90, equals 0.069. Convert the decimal in Step 3 to a percentage by multiplying by 100. In the example, 0.069 times 100 equals 6.9 percent.
