Definition:

1-year EPS Growth Rate refers to the percentage change in a company's earnings per share (EPS) over a one-year period. It is a measure of how much a company's profitability per share has increased or decreased over the past year.

Formula:

((EPS at end of year - EPS at start of year) / EPS at start of year) * 100

How to use the metric:

Investors and analysts use the 1-year EPS Growth Rate to assess a company's profitability trend and growth potential. A positive growth rate indicates improving profitability, while a negative rate suggests declining earnings. It is often used in conjunction with other financial metrics to evaluate a company's overall financial health and investment potential.

Limitations:

The 1-year EPS Growth Rate can be influenced by one-time events or accounting changes, which may not reflect the company's ongoing performance. It also does not account for external factors such as market conditions or industry trends. Additionally, focusing solely on short-term growth can overlook long-term sustainability.

Applies to:

This metric is applicable across various industries, particularly those with stable earnings and growth patterns, such as consumer goods, technology, and healthcare.

Doesn't apply to:

Industries with highly volatile earnings, such as commodities or startups, may not benefit from this metric as it may not accurately reflect their growth potential due to frequent fluctuations in earnings.

Summary:

The 1-year EPS Growth Rate is a useful metric for evaluating a company's short-term profitability trend. While it provides insights into earnings growth, it should be used alongside other financial metrics to gain a comprehensive understanding of a company's financial health. Its applicability varies across industries, with limitations in sectors with volatile earnings.