Earnings Estimate

What is an 'Earnings Estimate'

An earnings estimate is 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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