The Earnings Growth Ratio Calculator helps you figure out how much a company’s earnings have grown over a specific period. Whether you're comparing quarterly or yearly profits, this tool shows how a business is progressing financially.
This tool belongs to the Financial Analysis Calculator category. It is widely used by investors, financial analysts, and business owners to assess performance trends and make informed decisions.
By calculating the earnings growth ratio, users can understand whether a company is improving, stagnating, or declining in terms of profitability. This is vital when considering investments or evaluating business success.
formula of Earnings Growth Ratio Calculator
Use the formula below to calculate the earnings growth ratio:
Earnings Growth Ratio = (Earnings in Current Period − Earnings in Previous Period) / Earnings in Previous Period
Where:
- Earnings in Current Period = net income, profit, or earnings for the most recent period
- Earnings in Previous Period = net income, profit, or earnings for the earlier period (same length, such as previous quarter or year)
This formula measures the percentage change in earnings, helping you see how much growth or decline occurred from one period to the next.
Quick Reference Table: Sample Growth Ratios
| Industry | Average Growth Ratio | Notes |
|---|---|---|
| Technology | 15% – 30% | Often high due to fast expansion |
| Healthcare | 5% – 15% | Steady but moderate |
| Retail | 2% – 10% | Seasonal impact common |
| Energy | -10% – 5% | Highly sensitive to market prices |
| Manufacturing | 3% – 12% | Depends on demand and efficiency |
Key Terms for Better Understanding
| Term | Meaning |
|---|---|
| Net Income | Total profit after expenses and taxes |
| Period Comparison | Comparing same time spans (e.g., Q1 this year vs Q1 last year) |
| Positive Growth | Indicates improved earnings |
| Negative Growth | Indicates reduced earnings |
Example of Earnings Growth Ratio Calculator
Let’s say a company earned $120,000 this year and $100,000 last year. We want to know the growth ratio.
Step 1:
Earnings in Current Period = $120,000
Earnings in Previous Period = $100,000
Step 2:
Earnings Growth Ratio = (120,000 − 100,000) / 100,000
Earnings Growth Ratio = 20,000 / 100,000 = 0.20
This means the earnings growth ratio is 0.20 or 20%. So, the company’s earnings grew by 20% over the period.
Most Common FAQs
A good ratio depends on the industry. Generally, anything above 10% is considered strong for most sectors. However, tech companies often show higher growth, while mature industries might have smaller but stable increases.
Yes. You can use it for any consistent time frame—quarterly, annually, or monthly—as long as you compare the same type of periods (e.g., Q2 this year vs Q2 last year).
Investors use this ratio to spot growing companies. Consistent earnings growth usually signals strong management, good products, and future potential, all of which are attractive in an investment.