EPS next Y
Next-Year EPS Growth Rate
What is EPS Next Y (Next-Year EPS Growth)?
One-line definition: EPS Next Y (EPS Next Year Growth) is a growth metric that shows "how much the company's earnings per share are expected to grow next year compared to this year." In simple terms, it's a number that previews the company's "report card" for next year.
In English it's called EPS Next Year Growth or EPS Growth (Next Y), and in Korean it's referred to as next-year EPS growth rate or next-fiscal-year EPS increase rate.
One of the most important things in stock investing is "how much more this company can earn in the future." Even if past performance is great, the stock price can drop if future earnings are expected to decline. On the flip side, even if current results are ordinary, the stock price can soar if there's an expectation that next year will bring strong growth. EPS Next Y puts a number on this future growth expectation.
This metric is not the opinion of any single analyst, but a consensus value that averages the estimates of many Wall Street analysts. Because an average of many experts is more trustworthy than one person's opinion, financial data sites provide this consensus number by default.
English terms
EPS Next Year Growth, EPS Growth (Next Y), Forward EPS Growth, Next FY EPS Growth
Korean terms
Next-year EPS growth rate, next-fiscal-year EPS increase rate, next-year earnings growth outlook
How It's Calculated
EPS Next Y = (Next Year's Estimated EPS – This Year's Estimated EPS) / This Year's Estimated EPS × 100%
Here, "estimated EPS" means the consensus (average estimate) of Wall Street analysts.
Real calculation example – NVIDIA (NVDA):
This year's (FY2025) estimated EPS: $2.95
Next year's (FY2026) estimated EPS: $4.53
EPS Next Y = ($4.53 – $2.95) / $2.95 × 100 = +53.6%
Interpretation: Analysts expect NVIDIA's next-year EPS to grow about 54% over this year. This figure reflects the strong growth driven by surging demand for AI semiconductors.
What is Consensus?
Consensus is the average of the earnings estimates gathered from multiple brokerage analysts who cover a given company. For example, if 30 analysts cover Apple (AAPL), the consensus is the average of those 30 analysts' next-year EPS estimates.
The trend of "upward revisions" and "downward revisions" to consensus also matters. Even if both show a +15% growth outlook, the meaning is completely different depending on whether it was revised down from +20% three months ago or revised up from +10%.
During earnings season, companies announce their actual results, and these are compared with consensus to determine whether they were a "beat" or a "miss." The difference between actual results and consensus has a huge impact on the stock price.
How to Interpret It
If EPS Next Y is positive (+), it means earnings are expected to grow next year; if it's negative (–), it means earnings are expected to decline. However, you shouldn't judge based on the number alone — you must always consider the context.
+25% or higher – High-growth expectations
The market expects this company's earnings to grow significantly next year. This is common in companies in growth industries (AI, cloud, EVs, etc.) or companies whose results are expected to jump due to new product launches. Example: NVIDIA (NVDA) recorded EPS Next Y above +50% on the back of rising AI semiconductor demand.
+10% to +25% – Steady growth
A healthy company with earnings growing at a reasonable pace. You often see this level in large-cap tech stocks or market-leading companies. Example: Microsoft (MSFT) has EPS Next Y around +14%, and Alphabet (GOOGL) around +16%, which fall in this range.
0% to +10% – Low growth or maturity
This is often seen in mature companies that have already secured a stable position in the market. It usually means revenue growth has slowed or the company already holds a large share, limiting further growth potential. Example: Large dividend stocks like Coca-Cola (KO) and Johnson & Johnson (JNJ) fall in this range.
Negative (–) – Expected earnings decline
Next year's earnings are expected to fall below this year's. This can stem from various causes, such as an industry downturn, intensified competition, or the disappearance of one-time special effects. A negative number is not always bad. For example, when this year's earnings were unusually high due to a one-time effect and are simply normalizing, the number can turn negative.
Comparison with Similar Metrics
EPS Next Y gives a more accurate analysis when looked at alongside related indicators rather than on its own. Let's compare the characteristics and differences of each metric in the table below.
EPS this Y (This-year EPS Growth)
This is the EPS growth rate for the current year. Comparing it with EPS Next Y helps you see the growth trend. If this year is +30% but next year is +10%, it signals that growth is slowing. If this year is +10% but next year is +30%, it signals growth is accelerating. The direction of change between these two metrics is very important for investment decisions.
Forward P/E (Forward Price-to-Earnings Ratio)
This is the P/E calculated using next year's estimated EPS. When EPS Next Y is high, Forward P/E becomes relatively low. In other words, a high EPS growth rate means the stock looks cheaper on a forward basis. Looking at both together helps you judge whether the price is reasonable relative to growth.
PEG Ratio (Price/Earnings to Growth)
This is the P/E divided by the EPS growth rate. If P/E is 30 and EPS growth is 30%, the PEG is 1.0. A PEG below 1 is interpreted as undervalued relative to growth, and above 1 as overvalued. This is a favorite metric of the legendary investor Peter Lynch and is very useful for valuing growth stocks.
EPS next 5Y (5-Year EPS Growth)
This is the forecast for the average annual EPS growth rate over the next 5 years. One year is a short-term view; five years is a longer-term view. Even if growth slows in the short term, a bright 5-year outlook is positive from a long-term investment perspective. However, since estimates 5 years out carry high uncertainty, it's best to use this as a reference.
Practical Use
Let's look at specific scenarios for how EPS Next Y can be used in real investing.
Scenario 1: Finding companies with accelerating growth
Take Meta Platforms (META) as an example. In 2022, earnings plunged due to failed metaverse investments, but in 2023 the company declared a "year of efficiency" and carried out restructuring. As a result, EPS this Y came in at +70% and EPS Next Y at +25%, entering a phase of accelerating growth.
Companies whose EPS growth rates shift from negative to positive, or steadily increase, like this, can be a "turnaround" investment opportunity.
Scenario 2: Warning signs of slowing growth
Imagine a company whose EPS this Y was +40% but whose EPS Next Y plunges to +8%. This could be because this year's strong growth was one-off, or because the high base naturally pushes the growth rate down.
When growth is expected to slow, the market usually applies a discount (derating) to the stock price. It's common to see a stock whose P/E was 50x drop to 30x as growth slows.
Scenario 3: Using it together with PEG
Suppose you compare two companies. Company A has P/E 40x and EPS Next Y +40% (PEG = 1.0), while Company B has P/E 20x and EPS Next Y +5% (PEG = 4.0).
Based on P/E alone, Company B looks cheaper, but once you factor in growth, Company A is reasonably priced relative to its growth. This is why EPS Next Y and PEG should be used together.
Benchmarks by Sector
The expected level of EPS Next Y varies widely by industry. A +15% reading might be unremarkable for a tech company, but it would be very high growth for a utility company.
Technology/Semiconductors
Expected growth: +15% to +50%. Since innovation cycles are fast and the market is expanding, high growth is expected. AI-related semiconductor companies such as NVIDIA (NVDA), AMD, and Broadcom (AVGO) in particular are showing very high growth rates. However, semiconductors are a cyclical industry, so the high growth rates seen during a boom don't last forever.
Healthcare/Pharmaceuticals
Expected growth: +5% to +20%. For large pharma companies, earnings can swing sharply depending on patent expirations and new drug pipelines. As seen with Eli Lilly's (LLY) success in obesity treatments, a single blockbuster drug can dramatically change a company's EPS growth rate.
Consumer Staples
Expected growth: +3% to +10%. Companies like Coca-Cola (KO), Procter & Gamble (PG), and Walmart (WMT) are stable but find explosive growth difficult. Hitting +10% or more in this sector is quite good, and growth typically comes from price increases or expansion into emerging markets.
Utilities/REITs
Expected growth: +2% to +8%. Because these are regulated industries, earnings growth is limited. Since this sector focuses more on dividends than growth, dividend yield or dividend growth rate is considered more important than EPS Next Y.
Cautions
1. Analyst forecasts can be wrong
EPS Next Y is a consensus "forecast," not a "confirmed" figure. Sudden economic changes, unexpected events (pandemics, wars, etc.), and industry shifts can cause actual results to differ greatly from forecasts. The sharp downward revisions to most companies' EPS forecasts at the onset of COVID-19 in 2020 is a classic example.
2. Don't be fooled by the base effect
If this year's EPS is unusually low, next year's growth rate can look artificially high due to the base effect. For example, if one-time charges drove this year's EPS to $0.50 and next year's EPS is expected to normalize to $1.50, EPS Next Y would be +200%. You need to distinguish whether this is genuine growth or just normalization.
3. Don't ignore changes in share count
EPS is net income divided by the number of shares, so if share buybacks reduce the share count, EPS can rise even if net income stays the same. Apple (AAPL) keeps its EPS growth rate higher than its net income growth rate every year through large-scale share buybacks. It's important to distinguish real business growth from financial engineering.
4. Check the quality of the growth
It's also important whether EPS growth comes from revenue growth or from cost cutting. There are limits to boosting EPS only through cost cutting without revenue growth. Sustainable EPS growth over the long term should go hand in hand with revenue growth.
Investor Checklist
5 things you must check when analyzing EPS Next Y:
1. Is EPS Next Y positive? (Is there a basic growth expectation?)
2. Compared to EPS this Y, is growth accelerating or slowing?
3. How does the growth rate compare to peers in the same industry?
4. Has consensus been revised up or down recently?
5. Does the PEG come out below 1.0? (Is the price reasonable relative to growth?)
Frequently Asked Questions (FAQ)
Q. Is a stock automatically good if EPS Next Y is high?
A. Not necessarily. High EPS growth expectations may already be reflected in the stock price. For example, if EPS Next Y is +30% but the P/E is already 80x, the growth expectations are excessively priced in. You must always check PEG or Forward P/E together to judge whether you're paying a reasonable price for the growth.
Q. Should I avoid companies with negative EPS Next Y?
A. Not necessarily. It's important to understand why the number is negative. If this year was unusually strong and the next year is simply normalizing, it may not be a problem. On the other hand, if earnings are structurally declining due to industry conditions, caution is needed. You should comprehensively review revenue trends, margin trends, and industry outlook.
Q. How accurate is consensus?
A. Studies show that Wall Street analysts' 1-year-ahead EPS estimates are off by an average of about 10–15% from the actual value. While not perfect, it's a useful reference that reflects the expectations of the market as a whole. Consensus tends to be more accurate for large-cap stocks with many analysts covering them, and the deviation can be larger for small-caps or stocks with fewer covering analysts.
Q. Where can I find EPS Next Y information?
A. You can check it directly on the stock detail pages of US Stock Today. It's also available for free on foreign financial sites such as Finviz, Yahoo Finance, and Seeking Alpha. US Stock Today is the most convenient option for information organized in Korean.
Q. Which is more important: EPS Next Y or Revenue Growth Next Y?
A. Both are important, but they play different roles. Revenue Growth is a measure of business expansion, while EPS Growth includes improvements in profitability. The ideal company shows both revenue growth and EPS growth together. If revenue grows but EPS is stagnant, there's a problem with cost management; if only EPS grows while revenue is stagnant, it may be hitting the limits of cost cutting.
Notes for Korean Investors
Tips for using EPS Next Y when investing in U.S. stocks:
First, a U.S. company's fiscal year is not always January–December. For example, Apple's fiscal year ends in October, and Walmart's ends in January. You need to check exactly which period "next year" refers to.
Second, watch out for exchange rate fluctuations. No matter how good EPS comes out in dollar terms, a strong Korean won can reduce the actual return for Korean investors. If EPS growth is +10% but the won appreciates by 10%, the return in won terms is nearly 0%.
Third, Korean brokerages' HTS/MTS also provide EPS forecast data for U.S. stocks, but the updates can be slow. We recommend checking the latest consensus on US Stock Today or Finviz.
Fourth, during earnings season, consensus can change rapidly. EPS Next Y can shift sharply around quarterly earnings releases, so get in the habit of checking the updated figures regularly.