Run Rate

AAA

DEFINITION of 'Run Rate'

1. How the financial performance of a company would look if you were to extrapolate current results out over a certain period of time.

2. The average annual dilution from company stock option grants over the most recent three year period recorded in the annual report.

INVESTOPEDIA EXPLAINS 'Run Rate'

In the context of extrapolating future performance (the first definition), the run rate helps to put the company's latest results in perspective. For example, if a company has revenues of $100 million in its latest quarter, the CEO might say: "Our latest quarter puts us at a $400 million run rate." All this is saying is that if the company were to perform at the same level for the next year, they'd have annual revenues of $400 million.

The run rate can be a very deceiving metric, especially in seasonal industries. A great example of this is a retailer after Christmas. Almost all retailers experience higher sales during the holiday season. It is very unlikely that the coming quarters will have sales as strong as in the 4th quarter, and so the run rate will likely overstate next year's revenue.

RELATED TERMS
  1. Annual Percentage Yield - APY

    The effective annual rate of return taking into account the effect ...
  2. Annual

    An event that occurs once a year. Annual events or reports may ...
  3. Annualize

    1. To convert a rate of any length into a rate that reflects ...
  4. Annual Report

    1. An annual publication that public corporations must provide ...
  5. Appraised Equity Capital

    The excess of the market value of an asset over its book value. ...
  6. Asset Valuation Review (AVR)

    A process that establishes an estimate of the value of a failed ...
Related Articles
  1. Fundamental Analysis

    Great Expectations: Forecasting Sales Growth

    Predicting sales growth can be something of a black art, unless you ask the right questions.
  2. Options & Futures

    Forecasting Market Direction With Put/Call Ratios

    Options are not only trading instruments but also predictive tools that can help us gauge the feelings of traders.
  3. Investing

    Strategies For Quarterly Earnings Season

    Breeze through consensus estimates like the biggest Wall Street forecasters.
  4. Markets

    Surprising Earnings Results

    Consensus estimates can send stocks spiraling - but are they representing reality?
  5. Active Trading Fundamentals

    Leading Indicators Of Behavioral Finance

    Discover how put-call ratios and moving averages can be used to analyze investor behavior.
  6. Options & Futures

    What are the most common momentum oscillators used in options trading?

    Read about some of the most common technical momentum oscillators that options traders use, and learn why momentum is a critical concept for options trading.
  7. Options & Futures

    How are Bollinger BandsĀ® used in options trading?

    Use Bollinger Bands to identify volatility changes and place options trades at the right time; profit in bull or bear markets using these strategies.
  8. Trading Strategies

    How do traders interpret a Downside Tusuki Gap pattern?

    Understand the logic and rational behind a downside Tasuki gap candlestick pattern, which traders look to as a bearish continuation signal.
  9. Options & Futures

    Stock Futures vs Stock Options

    A full analysis of when is it better to trade stock futures vs when is it better to trade options on a particular stock. A quick overview of how each of them works and why would a trader, investor, ...
  10. First time stock investors may ask, is there any way to buy insurance on stocks to prevent losses?
    Options & Futures

    Stock Safety: Top 3 Ways to Limit Your Losses

    First time stock investors may ask, is there any way to buy insurance on stocks to prevent losses?

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center