Earnings Growth
The rate at which a company's profit increases from one period to the next.
Formula
Earnings Growth = (Current Period Earnings - Prior Period Earnings) / Prior Period Earnings x 100
Unit
%
In depth
Earnings growth is the main engine of long-run share returns, but the source matters as much as the rate: growth from rising volumes and margins is durable, growth from a lower tax rate, a one-off gain or a buyback is not. Growth from a depressed base flatters the percentage — recovering from a bad year is not the same as compounding. Sustainable growth is bounded by return on equity multiplied by the retention ratio, so a company claiming growth far above that number is either raising capital or borrowing. Compare earnings growth with revenue growth to see whether the increase came from selling more or from margin that may not persist.
Worked example
A company earning ₹20 crore after a bad year returns to ₹90 crore — growth of 350%. Against the ₹85 crore it earned two years earlier, the two-year CAGR is (90/85) raised to 0.5 - 1 = 2.9%. The headline and the reality differ by two orders of magnitude.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Earnings Growth” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.