where g1 = growth rate period 1, g2 = growth rate period 2 etc.
you have 5 EPS figures so you can calculate the growth rates for 4 periods...
e.g. assuming the last year EPS is a typo, and it's really for 2008
(2009 EPS - 2008 EPS) / 2008 EPS = growth rate 1 "g1"
(1.38 - 1.2) / 1.2 = 0.15
and so on...
for 2009 to 2010...
2010 EPS 0.5
2009 EPS 1.38
(0.5 - 1.38) / 1.38 = -0.63768
( 1 - 0.63768 ) = 0.36232
so for just these periods you'd have: {[(1 + g1)*(1 + g2)]^1/2} - 1
{[1.15 * 0.36232]^1/2} - 1
= 0.41667^1/2 -1
= 0.6455 - 1
= -0.3545, or negative 35.45% geometric mean growth rate...I didn't do all the growth rates b/c I'm late for an appointment, sorry, but you can do it! Just follow the formulas - calc each growth rate, add one to each growth rate, multiply them all together then raise to the power of 1/4 (e.g. ^ 0.25) and subtract 1 for the geometric mean growth rate
I assume you wanted the average growth rate, not the average EPS, which would be the sum of the EPSs / the number of EPSs given (an arithmetic mean EPS)
You have shown all numbers to be positive (even though in some cases the EPS is less than 1.) The average of these numbers would be again less than 1 and that would be the right answer.
In some cases, where the company makes a loss in some years, there the EPS would be negative and you will have to account for the sign in such a case while calculating the average.
Hey everyone,
Can someone help me on this?
I have EPS data as follows:
2012 EPS 0.85
2011 EPS 0.21
2010 EPS 0.5
2009 EPS 1.38
2009 EPS 1.2
So there are a few years when EPS growth was negative.
This post here
http://www.thinkingapplied.com/means_folder/deceptive_means.htm#.Uw-2HvRdVn8
clearly explains why one should use geometric mean for avg EPC calculation, but geometric mean requires all numbers to be positive.
so how does one calculate avg EPS in this case?
Thanks!!
