Earnings growth

Earnings growth is the annual rate of growth of earnings from investments.

Generally, the greater the earnings growth, the better.

When the dividend payout ratio is the same, the dividend growth rate is equal to the earnings growth rate.

Earnings growth rate is a key value that is needed when the DCF model, or the Gordon's model is used for .

The present value of stock is given by

where P = the present value, k = discount rate, D = current dividend and ${\displaystyle g_{i}}$ is the revenue growth rate for period i.

If the growth rate is constant for ${\displaystyle i=n}$ to ${\displaystyle \infty }$, then,

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