With acquisitions adding to
the earnings numerator and repurchases reducing the denominator, EPS growth could be surprisingly strong even if the economy isn't.
Not exact matches
If shares outstanding stop declining as buyback activity recedes and net equity issuance turns positive, it will put more onus on the
numerator — the actual
earnings — to propel
earnings per share higher.
To that list, add the fact that a P / E based on operating
earnings is meaningless unless one adds the total debt of the S&P 500 companies to the
numerator, or subtracts the total debt service on S&P 500 companies from the denominator.
Use accruals to make sure that management isn't manipulating
earnings through the
numerator, which could indicate their motives for the denominator as well.
It will be a tug - of - war between
earnings growth in the
numerator and liquidity conditions in the denominator.
In addition, the
numerator uses operating
earnings, instead of net income, which removes much of the «noise» from the metric.
The PE ratio has just two variables: price, which is the
numerator, and
earnings per share, which is the denominator.
But what really drives the change in valuation multiples is the
numerator; the price investors are willing to pay for a certain amount of
earnings.
Falling interest rates not only boost the
numerator in multiples but they also increase the denominator (
earnings).
We like BtM because the book value in the
numerator is more stable over time than
earnings or cashflow, which is important for keeping turnover down in a value portfolio.
We like [book - to - market capitalization] because the book value in the
numerator is more stable over time than
earnings or cashflow, which is important for keeping turnover down in a value portfolio.