EPS past 3/5Y
Past 3/5-year EPS growth rate
What is EPS past 3/5Y (Past 3–5 Year EPS Growth Rate)?
EPS past 3/5Y (Past 3–5 Year EPS Growth Rate, EPS Growth Rate past 3-5 Years) is a metric that shows how much a company's Earnings Per Share (EPS) has grown each year on average over the past 3 to 5 years. Think of it like a student's grade improvement trend over the past few years. It's not just the current grade (current EPS) that matters, but also how fast the grades have been improving (the growth rate) — this is key information for judging future potential.
Key Terms (Korean–English)
EPS past 3/5Y = Past 3–5 Year EPS Growth Rate
EPS = Earnings Per Share
CAGR = Compound Annual Growth Rate
EPS Growth = EPS Growth Rate
Revenue Growth = Revenue Growth Rate
Past EPS growth rate is a key metric that shows how a company's ability to generate profits has been changing. Companies that have consistently posted high EPS growth rates are likely backed by competitive advantages, market expansion, and management efficiency. On the other hand, companies whose EPS growth has stalled or declined may be facing a worsening business environment or losing competitiveness.
How to Calculate EPS past 3/5Y
Calculation Formula (CAGR Method)
EPS Growth Rate (CAGR) = (Current EPS / EPS from N years ago)^(1/N) - 1
Example: EPS 5 years ago was $3.00, current EPS is $5.50
Growth Rate = (5.50 / 3.00)^(1/5) - 1 = about 12.9% (annual average)
Example: EPS 3 years ago was $2.00, current EPS is $4.00
Growth Rate = (4.00 / 2.00)^(1/3) - 1 = about 26.0% (annual average)
Let's look at some real company examples. Thanks to the explosion in AI semiconductor demand, NVIDIA (NVDA) has recorded an EPS growth rate of over 70% annually over the past 3 years. This is an unprecedented level of growth in the company's history, driven by its dominant position in the GPU market combined with the arrival of the AI era.
On the other hand, Coca-Cola's (KO) past 5-year EPS growth rate is around 4–6% per year. The growth rate is low, but it has maintained steady growth for over 60 years, which shows outstanding consistency and stability. Microsoft (MSFT), thanks to the success of its cloud business (Azure), has recorded about 15–20% annual EPS growth over the past 5 years, showing an impressive growth trend even among large-cap stocks.
How to Interpret EPS past 3/5Y
Excellent: 15% or more annual growth
An EPS growth rate of 15% or more per year is a very impressive level. It's a pace where EPS doubles about every 5 years. Companies like this tend to see their stock prices rise significantly over the long term. However, you should always check whether this level of growth is sustainable going forward.
Good: 5–15% annual growth
This is the S&P 500 average level. Most solid large-cap stocks fall into this range. These are companies showing stable growth that beats the market average, and they are core candidates for long-term investing.
Weak: 0% or less annually (stagnant or declining)
If EPS is not growing or is declining, the company's ability to generate profits may be in trouble. There can be various causes such as intensifying competition, shrinking markets, or rising costs, and these companies tend to see their stock prices stagnate or fall. However, you should distinguish between temporary declines caused by one-time factors (restructuring, COVID, etc.) and structural problems.
Comparison with Similar Metrics
EPS past vs. EPS next (Past vs. Future Growth Rate)
Past growth rate is a fact that's already set, while future growth rate is an analyst's forecast. If past growth was high but future forecasts are slowing down, the company may be past its growth peak. Conversely, if past growth was low but future outlook is bright, it could be a turnaround opportunity.
EPS Growth Rate vs. Revenue Growth Rate
Ideally, EPS growth rate should be higher than revenue growth rate. This means margins are improving. If EPS grows faster than revenue, operating leverage is working; if the opposite is true, it's a warning sign that costs are rising faster than revenue.
Relationship Between EPS Growth Rate and PEG
Since PEG = P/E / EPS growth rate, past EPS growth rate is a key input in calculating PEG. Comparing Trailing PEG (based on past growth) with Forward PEG (based on future forecasts) helps you understand the direction of growth.
Practical Strategies for Use
Strategy 1: Screening for Consistent Growth Stocks
Screen for companies where both past 3-year and 5-year EPS growth rates are at least 15%, and revenue growth is also 10% or more. Such companies are likely to have a consistent growth engine. It becomes even more attractive if the future EPS growth forecast is also 15% or higher. Companies like Visa (V), Mastercard (MA), and Microsoft (MSFT) have steadily met these criteria.
Strategy 2: Catching Growth Acceleration
If a company's past 5-year EPS growth rate is 10% but the past 3 years show 25%, the company may have found a new growth driver. Amazon's (AMZN) AWS or Microsoft's (MSFT) Azure are classic examples — new businesses gaining traction that accelerated overall EPS growth.
Strategy 3: Early Detection of Growth Slowdown
If a company's past 5-year EPS growth rate is 20% but the past 3 years show only 8%, that's a signal that the company's growth momentum is weakening. The market tends to react very negatively to growth slowdowns and lower valuation (P/E) multiples, so you should prepare for downside risk in the stock price.
Strategy 4: Separating the Effect of Share Buybacks
EPS growth comes not only from profit increases but also from a reduction in the number of shares due to buybacks. If net income grows 5% but EPS grows 10%, the other 5% is from buybacks. To distinguish these, you should also check the Net Income growth rate. Apple (AAPL) is a representative example — its EPS has grown faster than net income thanks to large-scale buybacks.
EPS Growth Rate Characteristics by Industry
Technology / Semiconductors
An industry with high volatility but strong long-term growth. Companies riding mega trends like AI and cloud have recorded annual EPS growth of 20–50% or more. However, semiconductors are cyclical, so there's a big swing between boom and bust.
Consumer Staples
A stable but low growth rate of around 3–7% per year. Companies like Coca-Cola (KO) and Procter & Gamble (PG) have maintained consistent small growth for decades.
Energy
EPS swings drastically based on oil prices. EPS can triple or quintuple during oil price surges, or flip into losses during sharp drops. The oil price outlook matters more than past growth rates in this industry.
Healthcare
Large pharmaceutical companies show stable EPS growth of 5–10% per year, while biotech firms can see wild swings in EPS depending on drug approvals. UnitedHealth (UNH) is a healthcare company that has consistently recorded annual EPS growth above 15%.
Cautions
1. Watch out for base effects: If EPS was abnormally low at a certain point in the past (e.g., COVID), the subsequent growth rate will look inflated. If EPS dropped to $1 during COVID and later recovered to $3, the growth rate looks high but it may simply be a return to pre-COVID levels.
2. Remove one-time factors: If one-time items like restructuring costs, gains on asset sales, or tax refunds are included, the EPS growth rate gets distorted. It's more accurate to check the growth rate based on Adjusted EPS.
3. Impact of share buybacks: If the number of outstanding shares drops due to buybacks, EPS rises even if net income stays the same. You need to distinguish whether it's real profit growth or just the effect of share count reduction.
4. Past growth may not continue: A company that grew 30% annually over the past 5 years is unlikely to keep growing 30% for the next 5 years. As a company gets bigger, growth naturally slows down — keep this "Law of Large Numbers" in mind.
Checklist: Items to Review When Analyzing EPS past 3/5Y
1. Compare 3-year and 5-year EPS growth rates to judge acceleration/deceleration
2. Compare with revenue growth rate to understand margin trend direction
3. Check the impact of one-time factors (restructuring, taxes, etc.) on growth rate
4. Separate the buyback effect and check the net income growth rate
5. Compare with future EPS growth rate forecasts to predict the future direction
6. Compare growth level against industry peers
7. Calculate PEG to judge valuation reasonableness relative to growth rate
Frequently Asked Questions (FAQ)
Q. If the EPS growth rate is negative, does that mean I shouldn't invest?
A. It depends on the cause of the negative EPS growth. If EPS fell due to temporary factors (COVID, restructuring), it could grow again as things normalize. However, if the business is structurally declining (e.g., a traditional retailer failing to transition online), it's better to avoid the investment over the long term. Cause analysis is key.
Q. How do I interpret it when 3-year and 5-year growth rates differ?
A. If the 3-year growth rate is higher than the 5-year rate, growth is accelerating. If it's lower, growth is slowing down. For example, if the 5-year growth rate is 10% and the 3-year rate is 20%, recent growth has sped up; the opposite case would mean a slowing trend. An acceleration trend is more positive, but you need to verify whether it's sustainable.
Q. Where can I check EPS growth rate?
A. You can check EPS past 5Y and EPS next 5Y on Finviz. Yahoo Finance's Analysis tab also provides growth rate forecasts. Morningstar, Seeking Alpha, etc., also offer past and future EPS growth data. You can also check EPS growth rate on USStockToday's stock detail pages.
Q. Does a high EPS growth rate guarantee that the stock price will rise?
A. In the long run, EPS growth rate and stock price gains tend to be proportional, but in the short term, that's not necessarily the case. If the market has already priced in the high growth rate (high P/E), the stock price can drop if the actual growth rate falls short of expectations. What matters is the "actual growth rate versus expectations."
Notes for Korean Investors
High growth of U.S. companies: The average EPS growth rate of S&P 500 companies is around 7–10% per year, which is higher than that of Korean KOSPI companies on average. In particular, the growth rate of the technology sector is unrivaled globally. This high growth supports the high valuations of the U.S. stock market.
Quarterly earnings culture: U.S. companies report earnings every quarter, and if EPS exceeds the analyst forecast (consensus), the stock price rises (Beat), and if it falls short, it falls (Miss). If Korean investors understand the rhythm of this "earnings season," it will help with investment timing.
Currency effects: While U.S. company EPS is shown in dollars, companies with global businesses are affected by exchange rates when converting revenue in other currencies into dollars. During a strong dollar period, the dollar-converted amount of overseas revenue decreases, which can make EPS growth appear lower than it actually is.
Check Adjusted EPS: U.S. companies report both GAAP EPS (official accounting standards) and Non-GAAP EPS (adjusted EPS). Many believe that Adjusted EPS, which excludes stock-based compensation, restructuring costs, etc., better reflects the company's real profitability, but excluding too many costs can lead to distortion, so it's best to check both numbers.