Earnings Growth refers to the increase in a companyís net profit over a specific period, usually measured on a quarterly or annual basis. It is a key indicator of a companyís financial health, profitability, and long-term potential to create shareholder value. Investors closely track earnings growth to evaluate whether a company is expanding its business operations efficiently and sustaining its competitive advantage.

Formula:
Earnings Growth (%) = [(Current Period Earnings ñ Previous Period Earnings) / Previous Period Earnings] ? 100

Example:
If a company reported a net profit of ?100 crore last year and ?120 crore this year, its earnings growth would be:
((120 ñ 100) / 100) ? 100 = 20%

Types of Earnings Growth:
1. Quarterly Earnings Growth: Compares earnings from one quarter to the same quarter in the previous year.
2. Annual Earnings Growth: Measures year-over-year profit growth to assess long-term trends.
3. Compound Annual Growth Rate (CAGR): Evaluates the average yearly growth rate of earnings over multiple years, smoothing out short-term fluctuations.

Why Earnings Growth Matters:
- It reflects the companyís ability to generate higher profits from its operations.
- A consistent increase in earnings often leads to rising stock prices and higher investor confidence.
- Analysts use earnings growth to estimate future performance and derive valuation ratios like the Price-to-Earnings Growth (PEG) ratio.
- Strong earnings growth can signal effective management, market demand, and cost control efficiency.

Factors Influencing Earnings Growth:
- Revenue growth from expanding sales or new markets
- Improved operational efficiency and cost management
- Product innovation or diversification
- Favorable economic and industry conditions
- Strategic acquisitions or partnerships

Investor Perspective:
Investors look for companies with steady and sustainable earnings growth rather than short-term spikes. Consistent growth is generally rewarded with higher valuations, while erratic or declining earnings can signal potential risks.

In summary, Earnings Growth is a crucial metric that reflects how effectively a company is increasing its profitability over time. It serves as a cornerstone for investment analysis, valuation models, and long-term wealth creation strategies.