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Finance: What are trailing earnings? 11 Views
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What are trailing earnings? Hit play to find out.
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Transcript
- 00:00
finance a la shmoop what are trailing earnings here are the trailing earnings
- 00:08
for whatever dot-com 23 cents 32 cents 41 and 52 cents and a quarter quarter [Trailing earnings figures appear]
- 00:15
quarter quarter yeah here's where we are on the timeline today we just finished
- 00:18
the first quarter of the new year to print that lovely 52 cents a share in [Shares printing]
- 00:23
earnings well the stock of whatever.com is trading at a hundred bucks a share
Full Transcript
- 00:28
and tons of nervous Nellie investors are pulling out their hair over the very [Hair falls on floor]
- 00:33
high multiple that this stock is trading at so the trailing earnings of whatever
- 00:38
dot-com were well let's just add him up here in 23 32 41 52 totals a buck 48 [Share prices appear]
- 00:44
that's a dollar forty eight in trailing earnings so the years trailing earnings
- 00:50
of the company were a buck 48 and that means that at $100 a share with no cash
- 00:57
and no net debt to worry about here the company is trading at a hundred divided
- 01:01
by a dollar forty eight or about sixty seven times earnings there's nothing
- 01:06
funky going on in the balance sheet here whatever dot-com has a little bit of [Man holding a balance sheet]
- 01:09
cold cash and no debt so 67 times trailing earnings here is a huge
- 01:15
multiple it's a multiple of trailing earnings but look at the trend in
- 01:20
earnings growth the company has stated that it thinks it'll keep growing at [Growth percentage bar chart appears]
- 01:23
quote about this pace for the foreseeable future
- 01:27
unquote so if we do a little estimating then forward earnings might see them
- 01:31
print something like go I don't know 64 cents then 80 cents and 95 cents and a
- 01:37
buck 12 or something like that well if we add up those subsequent forward [Quarterly earnings appear]
- 01:41
quarterly earnings numbers we get $3 and 51 cents a share in earnings so wait a
- 01:47
minute we just came to the conclusion with the nervous Nellie's that this [Stop sign appears]
- 01:51
stock was so expensive when they were thinking about it as a hundred times
- 01:55
earning stock but on the projected forward earnings of 3.51 a share not a
- 01:59
hundred bucks it's trading at 100 divided by three point five one or about
- 02:02
twenty eight times earnings just a tad more than while say Bank of America or [Logos appear]
- 02:07
caterpillar Tractor or coca-cola but whatever dot-com is growing earnings at
- 02:12
like ten times faster pace than those old stalwart
- 02:15
companies they're a lot more risk that whatever dot-com misses its earnings
- 02:20
numbers yes absolutely but if it hits the 3.51 and then goes on to earn oh no
- 02:24
six bucks and then ten bucks a share in the subsequent years well the hundred [Whatever.com share price on graph]
- 02:28
dollars a share price here will look like a bargain in the rearview mirror so
- 02:32
that's what trailing earnings are all about you pick a spot in time and look [Calendar appears]
- 02:36
at the previous and I'll say four quarters earnings and then you think
- 02:40
about what multiple of that number of the stock is trading at and then map
- 02:44
that to future prognostications if the company is really growing this fast well [Whatever.com tree appears]
- 02:48
then even though it's multiple on trailing earnings might be high while on
- 02:52
forward earnings it might be low may be a bargain
- 02:55
just ask Amazon about this one they wrote the book on the trailing earnings [Amazon graph of stock price]
- 02:59
and guess where you can buy that book
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