How do I find Earnings per share growth (EPS growth) for a stock?
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I'd rather use a PEG ratio of a stock than it's PE ratio but I am having trouble figuring out a stock's predicted growth rate. I know PEG = PE/Annual EPS Growth, but how do I find a stock's predicted growth? Is it labeled as something different in the detailed view of the quote of a stock? Should I use the stocks historic growth/decline rate for the last 1-5 years? Thank you
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Answer:
You look into your crystal ball to see how much the earnings will grow. You might find what the company thinks is it's projected growth in it's reports. On Yahoo Finance, if you click on "key statistics", you'll see the earnings growth under income statement but of course, it's really just a guess.
Jasen at Yahoo! Answers Visit the source
Other answers
Growth rates are generally an estimate made by someone analyzing the stock using a number of possible methods. You can look at EPS growth rates over time, and judge the consistency of growth and see if it is an adequate prediction of possible future growth. Find the compounded growth rate over a time period, possible a full business cycle for comparison. Factoring this past performance, you can use your outlook on the company going forward to make adjustments to that growth rate. This is not a precise science and uses a lot of estimates and opinions. The sustainable growth rate is the rate of growth the company can realize without needing to increase their capital (equity or debt). It is computed as the ROE x the earnings retention ratio. Retention ratio is (Dividend per share/recent EPS). This rate assumes they can only grow within their capital, and that they are growing exactly up to the sustainable growth rate. These are both generaous assumptions. There are other methods and ways to compute growth, but it is something you should try and research in various equity valuation books.
JJ
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