What is a good value for EPS growth?
The result is assigned a rating of 1 to 99, with 99 being best. An EPS Rating of 99 indicates that a company's profit growth has exceeded 99% of all publicly traded companies in the IBD database.
As a general rule of thumb, the typical annual growth rate for EPS is generally between 5% and 8%.
High earnings per share typically mean that a company is more likely to have extra profit to distribute to its shareholders as dividends. Since EPS is so widely used by investors who choose stocks, a high EPS can attract investors and further drive up share prices.
5 Year EPS Growth (%)
This growth rate is the compound annual growth rate of Earnings Per Share Excluding Extraordinary Items and Discontinued Operations over the last 5 years.
EPS indicates how much money a company makes for each share of its stock and is a widely used metric for estimating corporate value. A higher EPS indicates greater value because investors will pay more for a company's shares if they think the company has higher profits relative to its share price.
Typically, the average P/E ratio is around 20 to 25. Anything below that would be considered a good price-to-earnings ratio, whereas anything above that would be a worse P/E ratio. But it doesn't stop there, as different industries can have different average P/E ratios.
Stock Price / EPS
It's typical for a stock to have a ratio between 15X to 25X or so. If a company is growing fast, then the P/E ratio can be fairly high – say over 50 or even 100. On the other hand, if a company is declining and has few prospects for growth, the ratio can be low, say under 10.
In general, the higher the EPS, the better. But, since different companies have different amounts of shares outstanding at different prices, a better tool for comparison is the price-to-earnings (P/E) ratio. This simply is a measure of the stock price as a multiple of its EPS.
Average PE of Nifty in the last 20 years was around 20.* So PEs below 20 may provide good investment opportunities; lower the PE below 20, more attractive the investment potential.
there is no rule-of-thumb figure that is considered a good or bad EPS, although obviously the higher the figure the better. ... investors tend to use it to compare companies in the same sector and to look for trends in an individual company's performance.
