Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] Re. Earnings
Date: Thu, 18 Apr 2002 10:20:44 -0500
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Nice article, jans, and a good one to add to the CANLSIM binder, thanks.
Katherine
----- Original Message -----=20
From: Spencer48@aol.com=20
To: canslim@lists.xmission.com=20
Sent: Thursday, April 18, 2002 10:06 AM
Subject: [CANSLIM] Re. Earnings
People:
I'm not sure who asked about the "validity" of earnings, but I =
just read=20
an article on earnings (by the OnLine Investor) that might prove =
helpful. =20
jans =20
"Earnings:
Look A Little Deeper
April 12, 2002 - Earnings for a company can come from various sources. =
However, there are three ways that really count: operating earnings, =
cost=20
cutting or a combination of the two. This earnings season, which will =
be=20
watched more closely than any in recent history, make sure you look =
behind=20
the headline number to find out how the earnings were made.
A company can announce some great earnings, but the stock can still go =
down.=20
Usually that's because those earnings came from a one time event =
called an=20
extraordinary item. While the company will announce those earnings, =
most=20
reporting services don't publish that number. Rather they give the =
operating=20
earnings. Those are the earnings the company produced from the ongoing =
business, not from sales of assets or subsidiaries. Another reason for =
a dip=20
in the stock in spite of better earnings: the company will give a poor =
outlook, suggesting that earnings won't be improving.
The ongoing earnings are the ones you want to focus on this quarter =
(and in=20
the future). And, just as important, you want to look at revenues as =
well. If=20
you only have earnings increasing without a revenue increase it means =
the=20
earnings are coming from cost cutting. That's fine for a while, but =
earnings=20
can't continue to grow if they only come from cost cutting. There is =
an=20
absolute limit to how much a company can cut costs before it hurts =
rather=20
than helps the enterprise.
What you would ideally like to see: an increase in revenues and an =
even=20
better increase, in terms of percentages, in earnings. For example, if =
you=20
saw a company that reported an increase of 5% in revenues and an =
increase of=20
10% in operating earnings (with no extraordinary items), you would =
know that=20
sales are increasing and the company is getting more efficient as it =
grows.=20
That's the powerful one-two punch that growth investors want to see: =
growth=20
in sales with better growth in earnings. It means that as the company =
gets=20
larger, it will also get more profitable. At some point, that stops, =
but good=20
growth companies can go on like that for years.
There will be a lot of earnings coming out in the next three weeks. =
There=20
will be lots of buzz, anguish and some pleasant surprises. When you =
start=20
looking at your companies, make sure you look a little deeper than =
just the=20
announced number. If you can see better revenues along with even =
stronger=20
earnings, then your company is doing something that most others can't =
in this=20
economy. That should make it a very worthwhile company to own.
-Ted Allrich"
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<DIV>Nice article, jans, and a good one to add to the CANLSIM =
binder,=20
thanks.</DIV>
<DIV> </DIV>
<DIV>Katherine</DIV>
<BLOCKQUOTE=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style=3D"FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV=20
style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
<A title=3DSpencer48@aol.com=20
href=3D"mailto:Spencer48@aol.com">Spencer48@aol.com</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A =
title=3Dcanslim@lists.xmission.com=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Thursday, April 18, 2002 =
10:06=20
AM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> [CANSLIM] Re. =
Earnings</DIV>
<DIV><BR></DIV>People:<BR><BR> I'm not sure =
who asked=20
about the "validity" of earnings, but I just read <BR>an article on =
earnings=20
(by the OnLine Investor) that might prove helpful. =
<BR>jans =20
<BR><BR>"Earnings:<BR>Look A Little Deeper<BR>April 12, 2002 - =
Earnings for a=20
company can come from various sources. <BR>However, there are three =
ways that=20
really count: operating earnings, cost <BR>cutting or a combination of =
the=20
two. This earnings season, which will be <BR>watched more closely than =
any in=20
recent history, make sure you look behind <BR>the headline number to =
find out=20
how the earnings were made.<BR><BR>A company can announce some great =
earnings,=20
but the stock can still go down. <BR>Usually that's because those =
earnings=20
came from a one time event called an <BR>extraordinary item. While the =
company=20
will announce those earnings, most <BR>reporting services don't =
publish that=20
number. Rather they give the operating <BR>earnings. Those are the =
earnings=20
the company produced from the ongoing <BR>business, not from sales of =
assets=20
or subsidiaries. Another reason for a dip <BR>in the stock in spite of =
better=20
earnings: the company will give a poor <BR>outlook, suggesting that =
earnings=20
won't be improving.<BR><BR>The ongoing earnings are the ones you want =
to focus=20
on this quarter (and in <BR>the future). And, just as important, you =
want to=20
look at revenues as well. If <BR>you only have earnings increasing =
without a=20
revenue increase it means the <BR>earnings are coming from cost =
cutting.=20
That's fine for a while, but earnings <BR>can't continue to grow if =
they only=20
come from cost cutting. There is an <BR>absolute limit to how much a =
company=20
can cut costs before it hurts rather <BR>than helps the=20
enterprise.<BR><BR>What you would ideally like to see: an increase in =
revenues=20
and an even <BR>better increase, in terms of percentages, in earnings. =
For=20
example, if you <BR>saw a company that reported an increase of 5% in =
revenues=20
and an increase of <BR>10% in operating earnings (with no =
extraordinary=20
items), you would know that <BR>sales are increasing and the company =
is=20
getting more efficient as it grows. <BR>That's the powerful one-two =
punch that=20
growth investors want to see: growth <BR>in sales with better growth =
in=20
earnings. It means that as the company gets <BR>larger, it will also =
get more=20
profitable. At some point, that stops, but good <BR>growth companies =
can go on=20
like that for years.<BR><BR>There will be a lot of earnings coming out =
in the=20
next three weeks. There <BR>will be lots of buzz, anguish and some =
pleasant=20
surprises. When you start <BR>looking at your companies, make sure you =
look a=20
little deeper than just the <BR>announced number. If you can see =
better=20
revenues along with even stronger <BR>earnings, then your company is =
doing=20
something that most others can't in this <BR>economy. That should make =
it a=20
very worthwhile company to own.<BR><BR>-Ted =
Allrich"</BLOCKQUOTE></BODY></HTML>
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Next Article (by Date): Re: [CANSLIM] When to Buy Spencer48@aol.com
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