ValuTool - Earnings Estimates

Earnings Estimates
The second page of the ValuTool is the Estimate page. It is here that you will offer your best assessment about the future of the company you are evaluating.

The key to forward looking valuations is to come up with strong, accurate estimates of how much a company is going to earn per share in the future. Companies like First Call provide information about what the analysts are saying they believe a company will earn. Your broker also might have specific information offered by your brokerage house that their analysts have compiled. The company itself will often provide you with statements or reports from analysts about the company if you call their investor relations department.

In the end, how much a company earns per share in the next few years will most likely correlate strongly with how the stock does, so your estimates are vital to the valuation of a stock.

All About Growth
While past rates of growth are not a sure indicator of the future growth of a company, they are worth taking into consideration. Therefore, ValuTool offers you a number of ways of looking at the historical growth of your company. The different growth rates will become more or less important based on the specifics of the company, and how well you believe their past may translate into their future.

For example, if your company had an incredible quarter, but it isn't likely to happen again, then taking Q over Q growth rates for the last two quarters would unfairly skew your view of the companies prospects. These growth rates are meant to help you tothink through the future estimates, but it is the estimates that are important for the next section, which deals with the valuations themselves.

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