Owner Earnings Run Rate


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.

BREAKING DOWN '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.

  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. Qualitative Analysis

    Securities analysis that uses subjective judgment based on nonquantifiable ...
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. Stock Analysis

    The Biggest Risks of Investing in FireEye Stock

    Examine the current state of FireEye, Inc., and learn about some of the biggest risks of investing in this cybersecurity company's stock.
  5. Stock Analysis

    The Biggest Risks of Investing in Gilead Stock

    Examine the current position of Gilead Sciences, Inc., and learn the major risks for investors considering buying Gilead stock.
  6. Fundamental Analysis

    Top Reasons IPO Valuations Miss The Mark

    The costly services of investment banks don’t necessarily guarantee accuracy in IPO pricing.
  7. Charts & Patterns

    The Importance Of Tracking The Whisper Number

    Don't let the name fool you: Whisper numbers are making themselves heard. Here's why you should be paying attention.
  8. Professionals

    Career Advice: Investment Banking Vs. Equity Research

    Read an in-depth analysis of equity research and investment banking careers, and learn what it is like to work in either one of these high-paying fields.
  9. Markets

    An Expert’s Guide to Market Volatility

    A cursory look at the performance of major U.S. averages reveals a modest correction in stocks with relatively little movement in interest rates.
  10. Mutual Funds & ETFs

    ETF Analysis: PowerShares FTSE RAFI US 1000

    Find out about the PowerShares FTSE RAFI U.S. 1000 ETF, and explore detailed analysis of the fund that invests in undervalued stocks.
  1. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  2. 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 >>
  3. How can a company execute a tax-free spin-off?

    The two commonly used methods for doing a tax-free spinoff are either to distribute shares of the spinoff company to existing ... Read Full Answer >>
  4. How are American Depository Receipts (ADRs) priced?

    The price of an American depositary receipt (ADR) is determined by the bank or other financial institution that issues it. ... Read Full Answer >>
  5. How can EV/EBITDA be used in conjunction with the P/E ratio?

    Because they provide different perspectives of analysis, the EV/EBITDA multiple and the P/E ratio can be used together to ... Read Full Answer >>
  6. How can a company reduce the unsystematic risk of its own security issues?

    Companies can reduce the unsystematic risk of their own security issues simply by doing the most effective job possible of ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!