Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] Newbie question - Definition of Earnings
Date: Thu, 30 May 2002 18:40:23 -0500
Previous Article (by Subject): RE: [CANSLIM] New CANSLIM method "Duke Miller"
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Good grief...one heck of a brain-to-finger error on my part...
Instead of "2 for 1 split", my example should have read:
"Company issues an additional 10m shares in a secondary offering. "
That is, the residual ownership of each shareholders' piece of the total =
earnings is diluted in that case. The company issued more stock, but =
after taking in the proceeds, were only able to up the total earnings by =
$2.5m. The per share earnings then decreases as a result.=20
Under a stock split, the prior earnings per share would be restated to =
account for the additional split shares.
Katherine=20
----- Original Message -----=20
From: Katherine Malm=20
To: canslim@lists.xmission.com=20
Sent: Thursday, May 30, 2002 2:05 PM
Subject: Re: [CANSLIM] Newbie question - Definition of Earnings
Hi Kelly,
Earnings and revenues are always measured on a per share basis so as =
to compare apples to apples. This is important, because the company may =
have increased/decreased the number of shares outstanding from one time =
period to the next, then each individual share's piece of the pie will =
be different.
Example:
Total Earnings/Net Income quarter 1: $10m
Total Earnings/Net Income quarter 2: $12.5m
+25 % , right?
Add the following outstanding share info:
Total Earnings/Net Income quarter 1 =3D $10m. Shares =3D 10m =
Earnings per share =3D $1/share
Company has a 2 for 1 split during the quarter, so
Total Earnings/Net Income quarter 2 =3D $12.5m Shares =3D 20m =
Earnings per share =3D $0.625/share
Growth in earnings per share QoQ =3D NEGATIVE 37.5%!
Also be sure to visit www.investors.com/learn to find answers to =
questions like this.
Katherine
----- Original Message -----=20
From: Kelly Short=20
To: canslim@lists.xmission.com=20
Sent: Thursday, May 30, 2002 1:45 PM
Subject: [CANSLIM] Newbie question - Definition of Earnings
IBD's Top 20 Investing Tips includes the following two points on =
which I'm confused:
1. Consider buying stocks with each of last three years' earnings up =
25% or more, ROE of 17%+ and recent earnings and sales accelerating.
2. Recent quarterly earnings and sales should be up 25% or more.
When they say "earnings" do they mean earnings per share or sales, =
net income, or other number? I would greatly appreciate input on this =
obviously newbian question.
Kelly Short
Business Development Manager
Neoris, Inc.
(817) 731-0995
mailto:kelly.short@neoris.com
http://www.neoris.com
-
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<BODY bgColor=3D#ffffff>
<DIV>Good grief...one heck of a brain-to-finger error on my =
part...</DIV>
<DIV> </DIV>
<DIV>Instead of "2 for 1 split", my example should have =
read:</DIV>
<DIV>"Company issues an additional 10m shares in a secondary offering. =
"</DIV>
<DIV> </DIV>
<DIV>That is, the residual ownership of each shareholders' piece of the =
total=20
earnings is diluted in that case. The company issued more stock, but =
after=20
taking in the proceeds, were only able to up the total earnings =
by $2.5m.=20
The per share earnings then decreases as a result. </DIV>
<DIV> </DIV>
<DIV>Under a stock split, the prior earnings per share would be restated =
to=20
account for the additional split shares.</DIV>
<DIV> </DIV>
<DIV>Katherine </DIV>
<BLOCKQUOTE dir=3Dltr=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=3Dkmalm@earthlink.net =
href=3D"mailto:kmalm@earthlink.net">Katherine=20
Malm</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, May 30, 2002 =
2:05=20
PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] Newbie =
question -=20
Definition of Earnings</DIV>
<DIV><BR></DIV>
<DIV>Hi Kelly,</DIV>
<DIV> </DIV>
<DIV>Earnings and revenues are always measured on a per share basis so =
as to=20
compare apples to apples. This is important, because the company may =
have=20
increased/decreased the number of shares outstanding from =
one time=20
period to the next, then each individual share's piece of the pie will =
be=20
different.</DIV>
<DIV> </DIV>
<DIV>Example:</DIV>
<DIV>Total Earnings/Net Income quarter 1: $10m</DIV>
<DIV>Total Earnings/Net Income quarter 2: $12.5m</DIV>
<DIV>+25 % , right?</DIV>
<DIV> </DIV>
<DIV>Add the following outstanding share info:</DIV>
<DIV>Total Earnings/Net Income quarter 1 =3D=20
$10m. Shares =3D =
10m =20
Earnings per share =3D $1/share</DIV>
<DIV>Company has a 2 for 1 split during the quarter, so</DIV>
<DIV>Total Earnings/Net Income quarter 2 =3D=20
$12.5m Shares =3D=20
20m Earnings per share =3D $0.625/share</DIV>
<DIV> </DIV>
<DIV>Growth in earnings per share QoQ =3D NEGATIVE 37.5%!</DIV>
<DIV> </DIV>
<DIV>Also be sure to visit <A=20
href=3D"http://www.investors.com/learn">www.investors.com/learn</A> to =
find=20
answers to questions like this.</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=3Dkelly.short@neoris.com =
href=3D"mailto:kelly.short@neoris.com">Kelly=20
Short</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>=
=20
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Thursday, May 30, 2002 =
1:45=20
PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> [CANSLIM] Newbie =
question -=20
Definition of Earnings</DIV>
<DIV><BR></DIV>IBD's Top 20 Investing Tips includes the following =
two points=20
on which I'm confused:<BR>1. Consider buying stocks with each of =
last three=20
years' earnings up 25% or more, ROE of 17%+ and recent earnings and =
sales=20
accelerating.<BR>2. Recent quarterly earnings and sales should be up =
25% or=20
more.<BR>When they say "earnings" do they mean earnings per share or =
sales,=20
net income, or other number? I would greatly appreciate input =
on this=20
obviously newbian question.<BR><BR><BR>Kelly Short<BR><BR>Business=20
Development Manager<BR>Neoris, Inc.<BR>(817) 731-0995<BR><A=20
=
href=3D"mailto:kelly.short@neoris.com">mailto:kelly.short@neoris.com</A><=
BR><A=20
=
href=3D"http://www.neoris.com">http://www.neoris.com</A><BR><BR><BR>-<BR>=
- -To=20
subscribe/unsubscribe, email "<A=20
=
href=3D"mailto:majordomo@xmission.com">majordomo@xmission.com</A>"<BR>-In=
the=20
email body, write "subscribe canslim" or<BR>-"unsubscribe =
canslim". Do=20
not use quotes in your =
email.</BLOCKQUOTE></BLOCKQUOTE></BODY></HTML>
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