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Evaluating Income and Projecting Earnings
Feb 26, 2006 - Are the most recently reported earnings useful in predicting future earnings? Are they representative of usual operations?
Education Are the most recently reported earnings useful in predicting future earnings? Are they representative of usual operations? These are important questions when analyzing a company. Most investors simply look at earnings, look at operations, and predict growth. Unfortunately, it might not be that simple. Unusual short-term effects can substantially change earnings, and make their use as a base for growth inappropriate. Income Adjustments: Part One There are many things that may cause temporary effects to the income of a company. These effects should be controlled for when comparing the stock to that of other firms, and when valuing the stock. Unrepresentative earnings may be caused by (for example): Up next: Other things to take into consideration when evaluating income. Analyses of Sectors BBH: Bullish above resistance. (Biotechnology)
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BDH: Bullish above resistance. (Broadband)
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BHH: Neutral. (Business to Business)
EKH: Neutral. (European Stocks)
HHH: Neutral. (Internet)
IAH: Neutral. (Internet Architecture)
IIH: Neutral. (Internet Infrastructure)
OIH: Neutral. (Oil Services)
PPH: Neutral. (Pharmaceuticals)
RKH: Neutral. (Regional Banks)
RTH: Neutral. (Retail)
SMH: Neutral. (Semiconductors)
SWH: Neutral. (Software)
TTH: Neutral. (Telecommunications)
UTH: Neutral. (Utilities)
WMH: Neutral. (Wireless) ...thanks
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Disclaimer: Please note that charts and commentary provided by the moderator are for educational purposes only. Any trades placed upon reliance on the moderator’s charts or information is taken at your own risk for your own account. Past performance is no guarantee of future results. While there is great potential for reward trading stocks, futures and options, there is also substantial risk of loss and you must decide your own suitability to trade. Future trading results can never be guaranteed. This is not an offer to buy or sell stock, futures, options or commodity interests. Most trading systems are based on historical formulas which have worked in the past. However, what has happened before may or may not happen again. You can lose all your money trading stocks, futures, and options and you must decide your own suitability as to whether or not to trade. Only trade with true risk capital you can afford to lose. Only trade markets you can properly afford to trade. Properly funded trading accounts typically perform better than those that are not. Never risk more than 2-3% of your account on any one trade. Always define your risk before entering a trade and place a stop to limit your risk. There are no guarantees or certainties in trading. Trading involves hard work, risk, discipline and the ability to follow rules and trade through any tough periods during a system’s draw downs. If you are looking for a guarantee, trading is probably not for you. Most people lose money trading. One of the reasons is that they lack discipline and are unable to be consistent. A system can help you become consistent. Ironically, worrying about the monetary aspect of trading can contribute to and cause a trader to make trading errors. Therefore, it is important to only trade with true risk capital.
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