Net income growth

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The Economic Times  Oct 22  Comment 
Akzo Nobel will show higher earnings growth as it made significant investment to increase manufacturing capacities & workforce & to strengthen brand.
newratings.com  Oct 21  Comment 
WASHINGTON (dpa-AFX) - Swiss biopharmaceutical company Actelion Ltd (ALIOF.PK) reported Tuesday a surge in its profit for the first nine months of fiscal 2014, mainly with strong product sales, including that of hypertension drug Opsumit. Citing...
SeekingAlpha  Oct 16  Comment 
By Brian Dightman: As of September 30th S&P 500 "as reported" earnings were approximately $108. With a closing index value at the time of 1,972 the P/E Ratio stood at 18.3, about 12% above the historical average. Earnings growth is the primary...
New York Times  Oct 15  Comment 
Investors continue to pour money into BlackRock’s index funds, and the firm’s 44 percent operating margin shows how lucrative the business of collecting and managing large pools of assets has become.
Forbes  Oct 5  Comment 
When it comes to which U.S. industries are generating the strongest profits, you don’t have to look much further than the construction sector, according to new private-company data from Sageworks, a financial information company.
SeekingAlpha  Sep 25  Comment 
By Value Line: By Kevin Downing The world of retail is a finicky one, where consumers' perception of merchandise assortments can make or break a retailer's numbers in any given year. Consumer tastes are always changing, making it difficult...
The Economic Times  Sep 23  Comment 
We think that an accelerated earnings growth, as envisaged by the consensus estimates, does suggest that the market valuations are nowhere near their historical highs.
The Economic Times  Sep 23  Comment 
"The new govt has been taking steps to fix the economy, but high interest rates come as a hurdle to the rate of earnings growth expected in FY15."
SeekingAlpha  Sep 17  Comment 
By Richard Shaw: In this Bull market lower-quality, lower-yield stocks have been outperforming higher-quality, higher-yield stocks. Earnings growth has been rewarded, but perhaps not with sufficient distinction between long-term sustainable growth...




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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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