The most utilized metric to value a stock is the P/E ratio.
In its simplest form, that is simply the price of the stock divided by the earnings-per-share. It is a valuable valuation metric, because in the long run a company’s stock price will correlate with its earnings.
1.Adjusted (Operating) Earnings also known as reported earnings, Warren Buffett’s favorite
2.Owners Earnings a close cousin to free cash flow
3. Basic Earnings and finally
4. Diluted Earnings (GAAP). Additionally, Bill will explain why companies report these different earnings metrics and explain the adjustments found in the financial statements that are used to calculate them.
Category: Value-You Academy