Investopedia

Continue to Site »

Earnings Momentum

Filed Under » ,
Dictionary Says

Definition of 'Earnings Momentum'

When corporate earnings per share (EPS) growth is accelerating or decelerating from the prior fiscal quarter or fiscal year. Earnings momentum typically coincides with accelerating revenues and/or expanding margins caused by increased sales, cost improvements or overall market expansion.
Investopedia Says

Investopedia explains 'Earnings Momentum'

Because of the quarterly reporting system required by the SEC, most earnings momentum analysis will rely on quarterly data, as the smaller reporting period can highlight momentum more clearly if it exists.

Investors are always on the lookout for positive earnings momentum, as it will usually propel a stock price higher over time, depending on how anticipated the momentum is. Earnings multiples (as in the P/E ratio) are the foundation for most stock prices, and if earnings are increasing at a faster clip than expected, then current multiples can quickly appear too low. As a result, investors will bid up the stock to reach a new level of equilibrium.

On the other hand, if earnings momentum falls away, the price of the underlying stock may drop despite the fact that earnings as a whole are still increasing.

Articles Of Interest

  1.

    Earnings Guidance: Can It Accurately Predict The Future?

    Explore the controversies surrounding companies commenting on their forward-looking expectations.

  2. Venturing Into Early-Stage Growth Stocks

    Picking these potential winners is all about sizing up risk. We show you how.

  3. Earnings Cyclicality Exposes Profitable Trends

    Learn to explore a company's past profits to find today's opportunities.

  4. 5 ETFs Flaws You Shouldn't Overlook

    Despite their popularity, exchange traded funds have some drawbacks that investors should know about.

  5. Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!

  6. Liquidity Vs. Solvency

    Learn about the differences between these two words and how each one is used in the stock market.

  7. Should You Invest Your Entire Portfolio In Stocks?

    It is true that stocks outperform bonds and cash in the long run, but that statistic doesn't tell the whole story.

  8. The Uses And Limits Of Volatility

    Check out how the assumptions of theoretical risk models compare to actual market performance.

  9. R-Squared

    Learn more about this statistical measurement used to represent movement between a security and its benchmark.

  10. Risk Tolerance Only Tells Half The Story

    Just because you're willing to accept a risk, doesn't mean you always should.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Validation Period

    The amount of time necessary for the premium on an insurance policy to cover the commissions, the cost of investigation, medical exams and other expenses associated with the issuance of the policy.

  2. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.

  3. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  4. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  5. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  6. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
Trading Center