Growth Metrics
Growth metrics show how quickly a business — or the profit it generates for shareholders — is expanding. They're most meaningful viewed as a multi-year trend rather than a single data point.
Revenue Growth Rate — YoY & CAGR
YoY = (Current period revenue − Prior period revenue) ÷ Prior period revenue × 100. CAGR = (Ending revenue ÷ Starting revenue)^(1 ÷ number of years) − 1.
The most basic growth measure — how fast the business is expanding.
Strengths: Simple, intuitive, and applicable to any company.
Watch out for: Growth from acquisitions can be mixed in with organic growth, overstating how fast the core business is really growing.
Combine with: Operating profit growth rate (to check whether revenue growth is translating into profit growth).
EPS Growth Rate
(Current EPS − Prior EPS) ÷ Prior EPS × 100
The growth rate of earnings per share. Because share buybacks reduce the share count, EPS growth can reflect real shareholder-level gains even when total profit growth is more modest.
Strengths: Captures the effect of changes in share count (buybacks or dilution), not just total profit.
Watch out for: Can look inflated due to one-off gains or aggressive buybacks alone, without genuine underlying business improvement.
Combine with: Net income growth rate (a gap between the two points to a change in share count).
Operating Profit Growth Rate
(Current operating profit − Prior operating profit) ÷ Prior operating profit × 100
Shows how fast profit from the core business is growing.
Strengths: Not affected by one-off items, so it reflects genuine improvement in the underlying business.
Watch out for: Comparing against an unusually weak prior-year base can make the growth rate look better than the underlying trend really is (the 'base effect').
Combine with: Revenue growth rate and the trend in operating margin.
Ordinary Income Growth Rate
(Current ordinary income − Prior ordinary income) ÷ Prior ordinary income × 100
The growth rate of profit including non-operating financial items (Japan-standard accounting).
Strengths: Captures a broader picture of growth, including financing activity.
Watch out for: A large gap versus operating profit growth may simply reflect a one-off swing in financial income or expense.
Combine with: Operating profit growth rate.
Net Income Growth Rate
(Current net income − Prior net income) ÷ Prior net income × 100
The growth rate of the final, bottom-line profit.
Strengths: Directly shows the growth in profit attributable to shareholders.
Watch out for: Prone to large swings from one-off items or tax changes — a single year's figure shouldn't be over-weighted.
Combine with: EPS growth rate and ordinary income growth rate.
Sustainable Growth Rate
ROE × (1 − Payout ratio)
The theoretical maximum growth rate a company could sustain using only retained (internally generated) earnings, without raising outside capital.
Strengths: If actual growth is far above this rate, it's a cue to check how much the company is relying on external financing (new debt or equity) to fund that growth.
Watch out for: A theoretical figure — actual growth won't necessarily match it.
Combine with: Actual revenue growth rate and payout ratio.