Earnings Estimate

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding ...
  2. Forward Looking

    A business slang term for predictions about future business conditions. ...
  3. Earnings Announcement

    An official public statement of a company's profitability for ...
  4. Analyst Expectation

    A report issued by an individual analyst, investment bank or ...
  5. Institutional Brokers' Estimate ...

    A system that gathers and compiles the different estimates made ...
  6. Guidance

    Information that a company provides as an indication or estimate ...
RELATED FAQS
  1. 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 >>
  2. How is depreciation related to the carrying value of a tangible asset?

    Depreciation is related to the carrying value of a tangible asset in that the latter is the original cost of the tangible ... Read Full Answer >>
  3. What metrics can be used to evaluate companies in the banking sector?

    When investment professionals evaluate banks, they are confronted with bank-specific issues such as to how to measure debt ... Read Full Answer >>
  4. What information should I look at on a publicly traded company for use in fundamental ...

    In finance, fundamental analysis focuses on estimating a company's value based on the underlying factors that affect its ... Read Full Answer >>
  5. Why would you use the TTM (trailing twelve months) rather than the data from the ...

    Public companies report their yearly financial statements along with an annual report. However, financial professionals are ... Read Full Answer >>
  6. Why is it important for an investor to understand business accounting?

    Investors use financial statements to obtain valuable information used in valuation and credit analysis of companies. Therefore, ... Read Full Answer >>
Related Articles
  1. Economics

    Earnings Guidance: Can It Accurately Predict The Future?

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

    Whisper Numbers: Should You Listen?

    These unofficial forecasts hold the potential for insider insight - and investment risk.
  3. Investing

    Strategies For Quarterly Earnings Season

    Breeze through consensus estimates like the biggest Wall Street forecasters.
  4. Options & Futures

    Getting The Real Earnings

    EPS helps investors analyze earnings in relation to changes in new-share capital.
  5. Economics

    Explaining the EBITDA Margin

    EBITDA margin can provide an investor with a cleaner view of a company's core profitability.
  6. Economics

    Explaining Residual Value

    Residual value is a measurement of how much a fixed asset is worth at the end of its lease, or at the end of its useful life.
  7. Economics

    What is the Cash Ratio?

    The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities.
  8. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.
  9. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  10. Economics

    Explaining Property, Plant and Equipment

    Property, plant and equipment are company assets that are vital to business operations, but not easily liquidated.

You May Also Like

Hot Definitions
  1. Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment ...
  2. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  3. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  4. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  5. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  6. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
Trading Center