Earning Potential


DEFINITION of 'Earning Potential'

The possible upside of the earnings that could be generated for each share outstanding of a particular stock. Earning potential reflects the largest possible profit that a corporation can make. It is often passed on to investors in the form of dividends. Greater earning potential drives up the price of a stock.

BREAKING DOWN 'Earning Potential'

Although earning potential can cause a stock's price to rise, it will not necessarily translate into higher current dividends. A company that comes out with an innovative new product may have higher earning potential in the future, but the projected revenue may not translate into actual profit for some time.

  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Shareholder

    Any person, company or other institution that owns at least one ...
  3. Gross Dividends

    Similar in concept to gross income, gross dividends are the sum ...
  4. Stock

    A type of security that signifies ownership in a corporation ...
  5. Profit

    A financial benefit that is realized when the amount of revenue ...
  6. Accountant

    A professional who performs accounting functions such as audits ...
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