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Earnings momentum |
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Earnings momentumAn increase in the earnings per share growth rate from one reporting period to the next.Earnings momentum Similar MatchesQuality of earningsQuality of earningsIncreased earnings due to increased sales and cost controls, as compared to artificial profits created by inflation of inventory or other asset prices. Primary earnings per (common) sharePrimary earnings per (common) shareEarnings available for the payment of dividends to common stockholders divided by the number of common shares outstanding. Price earnings ratio (P/E ratio)Price earnings ratio (P/E ratio)P/E = current share price of a company divided by its earnings per shareA company with a share price of 100p and earnings per share (EPS) of 5p has a P/E ratio of 100/5 = 20.A company's P/E (also known as its multiple) shows how high its shares are priced in relation to its historical earnings. Although mathematically, it relates share price to past performance, the reality is that P/Es are more about forward expectations than the past. A high P/E indicates that the City expects the company's earnings to grow fast in the future.P/E 're-ratings' by the City can have a dramatic effect on share price. If a company regarded as a growth stock announces sharply reduced trading figures, fund managers may revise their view of the company, and decide that it doesn't justify a growth stock P/E of 20, and can only justify a more normal P/E of, say 12. If earnings were 10p share, that re-rating would suggest a change in share price from 200p to 120p.Equally, if a company announces some major technical breakthrough, or a major contract, the City may decide that its future earnings potential justifies a growth P/E, and re-rate it upwards from 12 to 20 (or equivalent figures). In which case the share price will leap.There is nothing formal about this re-rating procedure. It is simply buyers in the market pushing up the price to reflect a new perception of a company. But P/Es do tend to be comparative, in that companies in the same sector with similar prospects would normally have similar P/Es. If they don't, there is invariably a reason accounting for the difference. Accounting earningsAccounting earningsEarnings of a firm as reported on its income statement. Retained earningsRetained earningsAccounting earnings that are retained by the firm for reinvestment in its operations; earnings that are not paid out as dividends. Further Suggestionsnormalised earningsEarnings Earnings before interest, taxes, depreciation, and amortization (EBITDA) Normalized earnings Earnings before interest, taxes, and depreciation (EBITD) lower earnings limit Earnings response coefficient earnings yield net relevant earnings Earnings taxable earnings Earnings price ratio retained earnings Earnings yield earnings factor State Earnings Related Pension Scheme earnings per share price earnings growth factor Earnings before taxes (EBT) Pretax earnings or profits Fully diluted earnings per shares earnings band earnings adjusted earnings Earnings retention ratio |
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