Earnings Forecasts: A Primer
我遇到了绕口令，有一句话总是念不顺：A consensus forecast for the current year is reported once actual results for the previous year are released.
Many investors rely on earnings performance to make their investment decisions. Stocks are assessed according to their ability to increase earnings as well as to meet or beat analysts' consensus estimates. (For more on this, see Why would my stock's value decline despite good news being released?)
The basic measurement of earnings is earnings per share. This metric is calculated as the company's net earnings - or net income found on its income statement - less dividends on preferred stock, divided by the number of outstanding shares. For example, if a company (with no preferred stock) produces a net income of $12 million in the third quarter and has 8 million shares outstanding, its EPS would be $1.50 ($12 million /8 million). (To read more, see Types Of EPS, How To Evaluate The Quality Of EPS and Getting The Real Earnings.)
So, why does the investment community focus on earnings, rather than other metrics such as sales or cash flow? Any finance professor will tell you that the only proper way to value a stock is to predict the long-term free cash flows of a company, discount those free cash flows to the present day and then divide by the number of shares. But this is much easier said than done, so investors often shortcut the process by using accounting earnings as a "good enough" substitute for free cash flow. Accounting earnings certainly are a much better proxy for free cash flow than sales. Besides, accounting earnings are fairly well defined and public companies' earnings statements must go through rigorous accounting audits before they are released. As a result, the investment community views earnings as a fairly reliable - not to mention convenient - measure.