Earnings momentum


 

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Earnings momentum

An increase in the earnings per share growth rate from one reporting period to the next.



Earnings momentum

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Earnings yield

Earnings yield

The earnings of a company are its annual profits after deduction of tax, dividends to preference shareholders and bondholders. They are usually expressed on a per-share basis (e.g. 7p), and the earnings per share (EPS) figure is calculated by dividing total earnings by the average number of shares in issue for the relevant accounting period.e.g. earnings or £2m, with 10m shares in issue would give an EPS of 20pThe earnings yield is the EPS as a percentage of the current market price of the share. So if the EPS was 7p and the current market price is 116p, the earnings yield7 / 116 x 100 = 6.03%Earnings yield is not used as commonly as its reciprocal measure, the P/E ratio. On the same figures, the P/E would be:116 / 7 = 16.6


Pretax earnings or profits

Pretax earnings or profits

Net income before federal income taxes are subtracted.


Net relevant earnings

Net relevant earnings

A person's pensionable income (that is, income from employment) plus taxable benefits in kind, less any allowable business expenses but before deduction of personal allowances. For self employed people these are taxable profits less capital allowances or losses from previous years.


Upper earnings level

Upper earnings level

The earnings level of an employee above which no further Class 1 National Insurance contributions are payable.


Price earnings growth factor

Price earnings growth factor

The PEG of a company is calculated by dividing its prospective P/E ratio by the estimated future growth rate in earnings per share of the company. So to calculate a PEG, you first need to calculate its P/E ratio.P/E = current share price divided by earnings per shareA company with a share price of 100p and earnings per share of 5p has a P/E ratio of 100/5 = 20.By itself the P/E ratio is a useful ratio because it shows how many times the current earnings the shares cost - in a sense, how many years you would have to wait to get your money back if the company paid out all its earnings to shareholders. But the limitation of the P/E ratio is that it looks at historical information and does not relate the price of the shares to its future performance. The PEG ratio builds in that extra layer of sophistication.Using the example of the same company, imagine that the consensus brokers' forecast for its future earnings growth rate is 15%.PEG = P/E divided by estimated future growth rateFor this company, the PEG would be 20 divided by 15 = 1.33.According to Jim Slater, the investor who popularised the use of PEG's as a stock share selection tool, a share with a PEG of 1 or lower is attractive. Put simply, the lower the PEG, the less you are being asked to pay for estimated future earnings. Jim Slater did not recommend use of the PEG as the only criteria of share selection. There are plenty of other fundamental checks that have to be made too.Note that the estimated future earnings are a critical part of the PEG calculation, and that if the forecasts made by brokers are wide of the mark, the PEG ratio will be unreliable. Because of this danger, most advocated of PEG's recommend using consensus forecasts, rather than the forecasts of any single broker/analyst.


Further Suggestions

Earnings response coefficient
price earnings ratio (P/E ratio)
taxable earnings
Earnings before interest and, taxes (EBIT)
adjusted earnings
earnings cap
Earnings yield
normalised earnings
Earnings retention ratio
Primary earnings per (common) share
State Earnings Related Pension Scheme
Earnings price ratio
Earnings before interest after taxes (EBIAT)
retained earnings
lower earnings limit
earnings
Quality of earnings
Retained earnings
Earnings
Earnings before taxes (EBT)
Earnings before interest, taxes, and depreciation (EBITD)
Earnings before interest, taxes, depreciation, and amortization (EBITDA)
Accounting earnings
earnings per share
Earnings


 
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