Metric
Earnings Growth
How fast bottom-line profit is expanding year over year.
Formula
(Current Net Income − Prior Net Income) ÷ Prior Net Income
Definition
Earnings growth measures the change in net income across reporting periods. It's typically viewed over multiple years to smooth out cyclical noise.
Why it matters
Long-term stock returns tend to follow earnings growth. Consistency matters more than single-year spikes, since steady compounders build wealth.
Building blocks
- Net Income
- Final profit left after all costs, interest, and taxes.
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