Required EPS Growth Rate Formula

Ehtsm

New member
Hi Experts!

Few days ago I was reading an article on the website at the subject of EPS Growth Rate. In the middle of this article the writer gave an example (given below).

Suppose in 2005 two companies A & B has EPS of 10 and 1 respectively and in 2012 their EPS is 15 and 5. It means that company A’s EPS has grown at rate of 14% per annum in last seven years where as company B’s EPS has grown at rate of 26% in last seven years".

I want to know the formula that how did he obtain the result of EPS 14% per annum of company "A" and the 26% of company "B"?

Kindly advise. I shall be very thankful to you.

Thanks
EHTSM

Last edited:

Alchemist

Staff member
You just have to use basic compound interest formula for such calculations.

A = P {(1 + r/100) ^ n}

You can take

A = eps at the end of period.
P = eps at the beginning of period.
r = eps growth rate.
n = number of years.

Member
I want to know the formula that how did he obtain the result of EPS 14% per annum of company "A" and the 26% of company "B"?
EHTSM
You sure an EPS of 10 going to 15 in 7 yrs was mentioned as a growth of 14% p.a.?

The calculator at COMPOUND INTEREST CALCULATOR gives a different number for Company A; Company B's growth rate tallies well with this Online Calculator's.