EPS Long-term growth rate is a financial metric that measures the compound annual growth rate (CAGR) of a company's earnings per share (EPS) over a long-term period, typically spanning three to five years or more. This metric is used to evaluate a company's financial health and its ability to generate sustainable earnings growth over the long term.
The EPS Long-term growth rate is calculated by taking the CAGR of a company's EPS over a specified period. The formula for calculating the long-term EPS growth rate is:
EPS Long-term growth rate = ((Ending EPS / Beginning EPS)^(1/n)) - 1
A higher EPS Long-term growth rate indicates that a company is growing its earnings at a faster rate over a longer period, which can be seen as a positive signal by investors.