Why EPS Growth Is the Most Powerful Catalyst for Stock Prices to Soar
•By Mahersaham Team
Artikel ini juga tersedia dalam Bahasa Melayu
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In the stock market, many factors can push share prices up — news, sentiment, analyst reports... But amongst the MOST POWERFUL?
EPS Growth (Earnings Per Share Growth). Why?
EPS is the net profit allocated to each unit of shares. When EPS increases every quarter or every year, it is a sign that the company is becoming more profitable — not just empty talk, but financial fact.
Fund managers and institutional investors favour companies that consistently grow their earnings. When they buy in large quantities, the share price surges.
Retail investors typically follow institutional footprints. When they see strong EPS figures, many are willing to hold shares longer — this reduces selling pressure and helps push prices up.
If EPS rises, the PE Ratio becomes lower (if the price remains unchanged). This makes the stock appear cheaper relative to its potential, attracting more buyers.
Real Example: Look at stocks like Inari, Vitrox, or Greatech during their years of EPS growth — prices rose not because of hype alone, but backed by real earnings growth.
Conclusion: Want to find high-potential stocks? Look at EPS growth. Not just for a day or two, but consistently quarter to quarter, year to year. That is the signal that a company has real momentum to keep advancing.
Case Study: GREATECH (GREATEC – 0208)
Sector: Technology / Automation
Focus Years: 2019–2021
Background: Greatech is an automation company from Penang that supplies equipment for the semiconductor, solar, and EV (electric vehicle) industries. It was listed on Bursa Malaysia in June 2019.
EPS Movement: FY2019: EPS = 5.26 sen
FY2020: EPS = 12.91 sen (+145% YoY)
FY2021: EPS = 19.94 sen (+54.5% YoY)
Impact on Share Price: June 2019 (IPO): Around RM0.61
December 2020: Around RM6.00
December 2021: Around RM6.30
A rise of nearly 10 times in just 2.5 years!
Key Catalyst: Consistent & aggressive EPS Growth!
Rising order book from the EV & solar sectors
High profit margins — proof of efficient cost management
Attraction of local & foreign institutional investors (fund inflow)
Key Lesson: Greatech''s share price rise was not caused by mere "stock goreng" (manipulation), but stemmed from real earnings growth. When EPS rises consistently, it creates a compelling narrative that the company is growing. This becomes a magnet for both large and small investors.
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EPS Growth refers to the rate of growth in net profit per share (Earnings Per Share) from one period to another. It is important because it shows whether a company is becoming more profitable or otherwise, and consistent EPS growth typically drives share prices upwards.
EPS Growth is calculated using the formula: ((Current EPS - Previous EPS) / Previous EPS) x 100%. For example, if this quarter''s EPS is RM0.10 and the previous quarter''s was RM0.08, then EPS Growth = ((0.10 - 0.08) / 0.08) x 100% = 25%.
No. Although EPS Growth is a strong indicator, investors need to consider other factors such as PE ratio, revenue growth, profit margins, company debt, and market sentiment to make more comprehensive investment decisions.
Generally, EPS Growth exceeding 15-20% per year is considered good. However, what matters more is the consistency of growth across several consecutive quarters. High but inconsistent EPS Growth may be less convincing compared to moderate but stable growth.
EPS Growth is the key metric in fundamental stock analysis. By understanding this metric, you can identify high-potential stocks before the market reacts to the company''s earnings growth.
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