Ticker&TapeEarnings growth: what to look for in EPS
Big stock moves are usually powered by big earnings growth. Learning to read a company's earnings per share takes a few minutes and helps you separate real leaders from stocks that are only moving on a story.
What EPS means
EPS stands for earnings per share. It is the company's profit for a period divided by the number of shares. If a company earns $10 million in a quarter and has 10 million shares, EPS is $1.00.
Companies in the U.S. report every quarter (every three months). Growth traders care less about the size of the profit and more about how fast it is growing.
Compare a quarter with the same quarter a year ago
Always compare a quarter with the same quarter one year earlier, not with the quarter just before it. Many businesses are seasonal, so a strong holiday quarter followed by a quiet spring quarter tells you nothing. Year-over-year growth removes that effect.
In the growth-stock method popularized by William O'Neil, many of the biggest winners showed quarterly EPS growth of 25% or more before their major advance. Higher is better, and 50% to 100% is common among true leaders.
- Last quarter $0.50, same quarter a year ago $0.40: growth is 25%.
- Last quarter $0.50, same quarter a year ago $0.20: growth is 150%.
- Be careful with tiny bases: going from $0.01 to $0.05 is 400%, but it means little.
Acceleration and annual growth
Acceleration means the growth rate is getting faster: for example 20%, then 35%, then 60% over three quarters. Accelerating earnings often show up just before or during a stock's strongest run. A clear slowdown for two quarters in a row, like 80% then 40% then 15%, is a warning.
Quarterly numbers can be noisy, so also look at annual EPS growth over the last three years. A steady record, ideally 25% or more per year, shows the growth is not a one-time event.
Surprises and estimates
Analysts publish estimates of what a company will earn. When the reported EPS is above the estimate, it is a beat or positive surprise; below is a miss. A string of beats and rising estimates tells you the business is doing better than expected. Still, the price reaction matters more than the beat itself. See reading an earnings report.
Using the EPS table on the chart
Every chart on Ticker&Tape shows a quarterly table with EPS and sales and their growth versus a year ago, plus earnings markers on the price bars. The data box also shows the latest EPS growth. Scan the last four to six quarters: you want large numbers that are steady or rising, backed up by sales growth.
Earnings checklist for growth stocks
| Latest quarterly EPS growth | 25% or more vs the same quarter a year ago |
|---|---|
| Trend of growth | Steady or accelerating over the last 2 to 3 quarters |
| Annual EPS growth | Ideally 25%+ per year over 3 years |
| Sales growth | Rising too, ideally 20%+ (confirms the earnings) |
| Surprises | Beats and rising estimates are a plus |
Common mistakes
- Comparing a quarter with the previous quarter instead of the same quarter a year ago.
- Getting excited about huge percentages that come from a tiny or negative base.
- Ignoring two quarters of sharp slowdown because the stock is still going up.
- Buying on earnings alone without checking the chart and the market direction.
Key points
- Look for quarterly EPS growth of 25% or more vs a year ago, ideally accelerating.
- Back up quarterly numbers with solid annual growth and rising sales.
- Strong earnings make a good stock; the chart tells you when to buy it.
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Live examples from the latest close, updated every trading day. Examples, not recommendations. 2026-10-02
Check what you learned
Answer at least 2 of 3 correctly to complete the lesson.
1. Why should you compare a quarter's EPS with the same quarter a year earlier, not with the quarter just before?
A strong holiday quarter followed by a quiet spring quarter tells you nothing. Comparing with the same quarter a year ago avoids that distortion.
2. Which sequence of quarterly EPS growth is the most encouraging?
Accelerating growth often shows up just before or during a stock's strongest run. A slowdown two quarters in a row is a warning.
3. A company's quarterly EPS went from $0.01 to $0.05, growth of 400%. How should you read it?
Percentages from very small numbers look huge but say little. Look for large, steady growth backed by sales and annual results.
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