Define: Earnings Growth

Business, Legal & Accounting Glossary

Definition: Earnings Growth



Advertisement



Full Definition of Earnings Growth


Earnings growth is a key indicator for measuring a company’s success and the driving force behind stock price appreciation. Put simply, earnings growth is the percentage gain in net income over time. Thus if a company earns $1.00 in the second quarter of year 1 and $1.15 in the second quarter of year 2, earnings growth was 15%. For multiyear periods, earnings growth is usually compounded; thus you may read “the company’s 5-year compound annual earnings growth rate was 8%”. Earnings growth in a new, start-up company can be misleading: if a company earns $1 in year 1 and $2 in year 2, earnings growth may be 100%, but it still is only $1. Ignoring this anomaly, however, it may be said that investors are especially enamoured of companies whose earnings growth is at “double-digit” (10%-plus) levels and, equally important, whose earnings growth is accelerating. On the other hand, earnings growth in mature firms will be at a lower, more constant level, and investors will ordinarily demand more in dividends to compensate for the reduced prospects of capital appreciation.


Advertisement




Cite Term


To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
https://payrollheaven.com/define/earnings-growth/
Modern Language Association (MLA):
Earnings Growth. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. April 09, 2020 https://payrollheaven.com/define/earnings-growth/.
Chicago Manual of Style (CMS):
Earnings Growth. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/earnings-growth/ (accessed: April 09, 2020).
American Psychological Association (APA):
Earnings Growth. PayrollHeaven.com. Retrieved April 09, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/earnings-growth/

Definition Sources


Definitions for Earnings Growth are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 9th February, 2020