EPS Growth Calculator
Projects a company's future earnings per share and implied stock price based on growth rate and P/E ratio. Analysts and investors use it to estimate a fair value target or screen for high-growth opportunities.
About this calculator
Earnings per share (EPS) measures the portion of a company's net profit allocated to each outstanding share. EPS growth analysis is central to equity valuation because stock prices tend to follow earnings over time. The projected future EPS is calculated as: Future EPS = currentEPS × (1 + growthRate / 100)ⁿ, where n is the number of projection years. Multiplying the result by the expected P/E ratio gives an implied future stock price: Implied Price = Future EPS × P/E Ratio. Historical EPS growth is calculated separately as: EPS Growth % = ((currentEPS − previousEPS) / |previousEPS|) × 100. Together these formulas let you project where a stock's price might trade if it sustains a given growth rate and valuation multiple.
How to use
A company has current EPS of $4.00, a projected annual growth rate of 15%, a 5-year projection period, and a P/E ratio of 20. Step 1 — Future EPS: $4.00 × (1 + 0.15)⁵ = $4.00 × 2.0114 = $8.05. Step 2 — Implied Stock Price: $8.05 × 20 = $161.00. If the stock currently trades at $80 (implied by $4.00 × P/E 20), the model suggests it could roughly double over five years if the 15% growth rate and P/E multiple hold. This forms the basis of a simple PEG-style growth valuation.
Frequently asked questions
What is a good EPS growth rate for a company's stock valuation?
Growth rates are highly sector-dependent. Mature, stable companies in utilities or consumer staples may have EPS growth of 3–6% annually, which aligns with modest P/E multiples of 12–16. High-growth technology or healthcare companies may sustain 20–30% growth for several years, justifying premium multiples. A commonly used benchmark is the PEG ratio: a stock is considered fairly valued when its P/E equals its expected EPS growth rate. Growth rates above 15% for more than a few years are exceptional and should be scrutinised carefully before being used in multi-year projections.
How does EPS growth differ from revenue growth and which matters more for stock valuation?
Revenue growth measures how fast a company's top-line sales are expanding, while EPS growth measures the profit flowing to shareholders after all costs and taxes. A company can grow revenue rapidly while EPS stagnates or declines if margins are compressing or share count is diluting. For stock valuation, EPS growth is generally more important because the market ultimately prices earnings power. However, revenue growth matters significantly for early-stage companies that are not yet profitable, where investors focus on the path to eventual earnings.
Why does the P/E ratio matter when projecting a future stock price from EPS?
The P/E ratio is the market's valuation multiple — how many dollars investors are willing to pay per dollar of earnings. Multiplying projected EPS by the assumed future P/E converts an earnings forecast into a price target. The challenge is that P/E ratios themselves change with interest rates, market sentiment, and company prospects. Using a P/E significantly higher than the current multiple builds in multiple expansion, which adds risk to the forecast. Most conservative analysts use the current or a slightly contracted P/E to avoid overstating the target price.