Daily Gains Letter

Corporate Earnings

Corporate Earnings in 2014

Corporate earnings, also referred to as “company earnings” and “corporate profits,” is the amount of money a company makes in certain period of time. The price/earnings multiple is still the most common tool used to value a company. The stock market values a company based on the amount of money (earnings and profit) the company has after all expenses, including taxes, have been paid.

In a stock market where stocks are traded at an average of 12 times earnings, a company making $1.00 a share per year would be valued at $12.00. All things being equal, the more money a public company makes, the higher its stock price.