Earnings Estimate

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DEFINITION of 'Earnings Estimate'

An analyst's estimate for a company's future quarterly or annual earnings. Future earnings estimates are arguably the most important input when attempting to value a firm. By placing estimates on the earnings of a firm for certain periods (quarterly, annually, etc), analysts can then use cashflow analysis to approximate a fair value for a company, which in turn will give a target share price for publicly traded companies.

BREAKING DOWN 'Earnings Estimate'

Analysts use forecasting models, management guidance and fundamental information on the company in order to derive an estimate. Market participants rely heavily on earnings estimates to gauge a company's performance when announcing quarterly or annual results. The analysts' earnings estimates are used as a benchmark to measure a firm's performance relative to how experts expected it would do.

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RELATED FAQS
  1. What can I learn about a company by studying its earnings report?

    Fundamental analysts often pore over quarterly earnings reports when the reports arrive, hoping to gain an inside track on ... Read Full Answer >>
  2. One of my stocks missed the deadline to file its quarterly financial statements. ...

    The date and time that a company releases its earnings is very important because investors looking to buy or sell the particular ... Read Full Answer >>
  3. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  4. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
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    Small business owners should go through the bank reconciliation process at least monthly, and many business consultants recommend ... Read Full Answer >>
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