Owner Earnings Run Rate

AAA

DEFINITION of 'Owner Earnings Run Rate'

An extrapolated estimate of an owner's earnings (free cash flow) over a defined period of time (typically a year). This assumes that the firm's financial performance stays consistent throughout the period. Therefore, this estimate can be difficult to assess if the firm is operating in a business that experiences seasonality, because owner earnings from one period may not be applicable across the entire time period.

INVESTOPEDIA EXPLAINS 'Owner Earnings Run Rate'

For example, after three quarters of performance, the company's owner earnings is $9 million. Assuming that performance stays consistent, the company's owner earnings run rate for the fiscal year would be $12 million ($3 million per quarter).

Owner earnings is often an important metric that investor's can use to gauge a firm's financial health. Increased owner earnings tend to act as a signal that a company's subsequent earnings will be good. Therefore, assessing an accurate owner earnings run rate could be very important in predicting the company's longer term performance.

RELATED TERMS
  1. Business Cycle

    The fluctuations in economic activity that an economy experiences ...
  2. Earnings Estimate

    An analyst's estimate for a company's future quarterly or annual ...
  3. Run Rate

    1. How the financial performance of a company would look if you ...
  4. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash ...
  5. Seasonality

    A characteristic of a time series in which the data experiences ...
  6. Appraised Equity Capital

    The excess of the market value of an asset over its book value. ...
RELATED FAQS
  1. What's the difference between the coverage ratio and the levered free cash flow to ...

    Coverage ratios focus on a company’s ability to manage its debt, while the levered free cash flow to enterprise value ratio ... Read Full Answer >>
  2. How can I use market capitalization to evaluate a stock?

    Market capitalization represents the market value for an entire company. Investors can compare market cap to financial data ... Read Full Answer >>
  3. How do S&P 500 futures work?

    S&P 500 futures are a type of capital asset contract that provides a buyer the right to a predetermined selection of ... Read Full Answer >>
  4. What are the drawbacks of using the Dividend Discount Model (DDM) to value a stock?

    Drawbacks of using the dividend discount model (DDM) include the difficulty of accurate projections, the fact that it does ... Read Full Answer >>
  5. How does debt-to-capital change when a company issues new shares of stock?

    The debt to capital of a company changes when it issues new shares of stock by decreasing its amount of total debt in relation ... Read Full Answer >>
  6. What is the impact of retained earnings on stockholders equity?

    Stockholders' equity is a balance sheet item that represents the capital received from shareholders plus retained earnings. ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Analyze Cash Flow The Easy Way

    Find out how to analyze the way a company spends its money to determine whether there will be any money left for investors.
  2. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  3. Markets

    Free Cash Flow: Free, But Not Always Easy

    Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery.
  4. Fundamental Analysis

    What is Quantitative Analysis?

    Quantitative analysis refers to the use of mathematical computations to analyze markets and investments.
  5. Charts & Patterns

    How to Analyze Pharma Stock Fundamentals

    What you need to know about analyzing the fundamentals of pharma stocks.
  6. Charts & Patterns

    Why These May Be the Top 4 Growth Stocks of 2015

    These four stocks have high upside potential in 2015.
  7. Investing

    Why Cash Management Is Key To Business Success

    Businesses need to generate a healthy cash flow to survive, but not hold too much so that inventory suffers or investment opportunities are missed.
  8. Charts & Patterns

    Are These the Top Dividend Stocks of 2015?

    These dividend-paying companies offer a lot more than just dividends.
  9. Charts & Patterns

    Top 10 Alternative Energy Stocks for 2015

    As energy demands continue to rise, the alternative energy sector is heating up. Here are the top 10 promising alternative energy stocks for 2015.
  10. Charts & Patterns

    Why Is Chipotle So Successful & Popular?

    Chipotle's emphasis on simplicity and high-quality ingredients have made the restaurant immensely popular among consumers and, in turn, investors.

You May Also Like

Hot Definitions
  1. Fiduciary

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

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. 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 ...
  4. 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 ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center