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Quarterly Earnings Growth (YoY)

Quarterly Earnings Growth (YoY)

Quarterly earnings growth year-over-year shows how much profit has changed compared to the same quarter last year. Positive values mean earnings are growing; negative values mean they are shrinking.

How it relates

Trailing P/ETrailing P/E compares the current share price to the company's earnings per share over the last year. Higher P/E often reflects higher growth expectations, while lower P/E can signal lower expectations or potential undervaluation.÷Quarterly Earnings Growth (YoY)=PEG RatioThe PEG ratio compares the P/E ratio to the company's expected growth rate. Values around 1 are often seen as 'fair', while much higher values can mean the stock is expensive relative to its growth.

Where it fits

Quarterly Earnings Growth (YoY)→Growth

Quarterly earnings growth year-over-year measures the percentage change in a company's earnings (typically net income or EPS) compared to the same quarter one year ago. This comparison eliminates seasonal patterns, revealing whether profitability is genuinely improving. Earnings growth is one of the most closely watched metrics by investors and analysts, often driving stock price movements around earnings announcements.

The calculation:

Quarterly Earnings Growth = (Current Quarter EPS - Same Quarter Last Year EPS) / |Same Quarter Last Year EPS| × 100

For example, if Q2 EPS this year is $1.50 versus $1.20 in Q2 last year, quarterly earnings growth is 25%.

Interpreting growth rates:

  • 25%+ growth: Exceptional; often drives significant stock appreciation
  • 15-25% growth: Strong; typically associated with growth stocks
  • 5-15% growth: Moderate; reasonable for mature companies
  • 0-5% growth: Slow; may be acceptable if accompanied by dividends
  • Negative growth: Earnings decline; investigate causes

Why year-over-year comparison matters:

  • Seasonal neutrality: Retailers earn most in Q4; comparing Q4-to-Q4 is meaningful
  • True trend: Removes quarter-to-quarter noise
  • Expectations basis: Analysts forecast YoY growth; beats/misses drive stock moves

Quality of earnings growth:

  • Revenue-driven: Growth from higher sales is most sustainable
  • Margin expansion: Cost cutting can boost earnings temporarily
  • Share buybacks: EPS can grow even with flat net income if shares decline
  • Tax benefits: One-time tax changes inflate growth unsustainably

Be cautious with earnings growth from a low or negative base. A company recovering from a loss year may show 500% growth that isn't repeatable. Compare growth to revenue growth—if earnings grow much faster than revenue, investigate whether margin improvements are sustainable or one-time.