Net income growth

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The Economic Times  Apr 17  Comment 
RIL had posted a net profit of Rs 5589 crore in the Jan – March ’13 quarter, which is expected to stay in the range of Rs 5550 crore to Rs 5650 crore.
Forbes  Apr 15  Comment 
DuPont?s agricultural sales jumped disproportionately during the last quarter due to earlier seed shipments made by the company for the new planting season. This is expected to pull down its sales volume growth during the first quarter. Apart from...
guardian.co.uk  Apr 12  Comment 
Nasdaq composite is down for a third week as big drops in glamour tech stocks keep the index falling Investors drove the US stock market lower for a second straight day on Friday as they grew anxious that earnings growth was faltering. Weaker...
Clusterstock  Apr 4  Comment 
There are three basic forces that drive earnings per share growth: revenue, profit margins, and share counts. Fattening profit margins have enabled corporations to book record earnings despite weak sales growth. Because sales have been weak,...
The Economic Times  Apr 1  Comment 
We are looking at about 12% earnings growth this year and about 17% next year as an economic recovery begins to gather pace.
The Economic Times  Mar 28  Comment 
In my view, we should be positive on India irrespective of the elections and I do not think elections matter as much as the market thinks they do.
Wall Street Journal  Mar 12  Comment 
CSX Corp.'s chief financial officer warned that severe weather will reduce the railroad company's first-quarter earnings.
SeekingAlpha  Mar 8  Comment 
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SeekingAlpha  Mar 7  Comment 
ByWes Blevins: A little more than three years ago, I left a job that provided matching 401(k) contributions. I had worked there for some time, so I had a decent amount of money to roll over into a new IRA account. Around the same time, my wife...




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Net income growth is the annualized rate of growth over the previous year's net income

Net income growth is the percentage gain (or loss) in net income over time. It is a good indicator of the rate at which companies have grown profits . Stocks with higher net income growth rates are typically more desirable than those with lower net income growth rates.

Investors are particularly enamored by companies with net income growth in the double digits, or greater than 10% growth, and equally important are those companies that have accelerating earnings growth. More mature firms will have lower, more constant levels of growth and typically compensate investors with greater dividends instead of a high growth rate.

When calculating net income growth for multi-year periods, net income growth is usually compounded.

Examples

  • Company XYZ earned $-1 million in 2007. In 2008, they earned $1.35 million. Company XYZ has 35% net income growth. (.35 / 1)

Net Income Growth Calculation on Wikinvest

Wikinvest calculates net income growth as the growth of trailing twelve months of net income. The treatment is different from Yahoo! Finance which calculates quarterly year-over-year growth. The following example will illustrate the difference:

' 2006 2007 2008
Q1$100m$104m$144m
Q2$120m$142m$120m
Q3$130m$140m
Q4$140m$170m

Q2 2008 is the most recent quarter. In this case, Yahoo! Finance would calculate net income growth as -15.5% [(120-142)/142].

Wikinvest, on the other hand would calculate the growth as 11.2%. This is because wikinvest calculates the growth based on the net income generated in the last twelve months. In this case, Q3 07, Q4 07, Q1 08 and Q2 08. Specially, it is calculated as:

Net Income growth = ((120+144+170+140)-(142+104+140+130))/(142+104+140+130) = 11.2%

Taking the growth based on trailing twelve months of net income mitigates undue fluctuations that affect a single quarter.

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