What it measures
Earnings per share (EPS) is net profit divided by the number of shares. EPS growth is the change from a year earlier. It is the number that ultimately drives the share price over long periods, because it is the profit that belongs to each share you own.
As with revenue, there are two versions:
- TTM EPS growth: the last twelve months versus the twelve before. See the glossary entry.
- Forward EPS growth: the analysts' consensus for the next twelve months. See the glossary entry.
Operating leverage
When a company's costs are mostly fixed, extra revenue falls almost straight to profit. Revenue up 15% can mean earnings up 30%. This is operating leverage, and it is why EPS growth faster than revenue growth is a good sign: margins are expanding.
It also works in reverse. When revenue slows, earnings can fall faster.
Why forward EPS growth matters for valuation
A fast-growing company looks expensive today and cheap later. Take a stock at a forward P/E of 22. If EPS grows 15 to 20% a year, in four years earnings are 1.7 to 2.1 times higher, and the same price would be a P/E of about 11 to 13. Growth shrinks the P/E over time. This is exactly what the PEG ratio captures.
What strong looks like
| Rating | EPS growth |
|---|---|
| Strong | Above 15%, alongside healthy revenue growth |
| Mixed | Positive but slower than revenue |
| Weak | Flat or falling |
Caveats
- Buybacks reduce the share count and raise EPS without any growth in the business. Check that net income is growing too.
- One-off items such as asset sales or tax benefits can inflate a quarter. Compare GAAP with adjusted figures and read why they differ.
- Low bases produce huge percentages. EPS going from $0.10 to $0.30 is +200% and says little.
See also
- Earnings per share (EPS) What earnings per share means, basic versus diluted EPS, GAAP versus adjusted EPS, and how EPS connects profit to the share price.
- Revenue growth (TTM and forward) How to read revenue growth, the difference between trailing (TTM) and forward growth, what counts as strong, and the deceleration warning sign.
- P/E ratio (price-to-earnings) What the P/E ratio means, trailing versus forward P/E, what counts as high or low, and why P/E alone can mislead without growth.
- PEG ratio The PEG ratio divides the P/E by earnings growth, so it judges valuation and growth together. What the bands mean and how to use it.
Pages that link here: Earnings reports and calls, Finviz screener guide, Fundamental analysis, Fundamentals checklist, Growth, value and dividend investing, How to research a company, Net margin, Operating margin, Stock screening and scoring, Stocks as ownership, not symbols, The income statement
Last updated September 30, 2026. Education only, not investment advice.