Earnings is the profit or bottom line of a company. They are the net income the company would make after tax. Simply put, it is company revenues minus all the costs and expenses incurred by the company. It is also called as net profits of the company.
They help in determining whether the company is profitable in the long run and plays a key role in determining the share prices of the company. Investors and analysts focus on the earnings of the company and compare it with analyst estimates, its own historical earnings, and that of its contemporaries.
Earnings is the net profits made by the company in a given period, which is usually a quarter (3 months). Analysts keep a track of these numbers regularly to know how the company is performing.
A company whose earnings is more than what is estimated by analysts catches the eye of the investors, while those who fail to make it consistently are considered risky investments.
Some common ways of measuring earnings include :
It is the ratio of a company’s profitability per share. It can be measured by dividing company’s total earnings by the number of shares outstanding.
Price-to-earnings ratio is used to identify the relative value for the earning of other companies in the same industry. It is measured by dividing the share price by earnings per share. A company with a high P/E value when compared to its competitors may be overvalued and vice versa.
This is obtained by dividing the latest 12-month earnings per share by the current share price.
Accumulated earnings are the net profits of a company that are paid to shareholders as dividends. They are reinvested into the company itself.
Retained earnings are the total income earned by the company in its lifetime, minus dividends paid to shareholders.
Sorry, our deep-dive didn’t help. Please try a different search term.