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Focusing on Per Share Earnings
There are many investors that will place a lot of weight on the per share earnings of the past five years when they are trying to figure out and choose a stock they should purchase. Looking at the per share earnings on their own and placing any significance or importance on the earnings that exited four or five years ago is the same thing as trying to obtain adequate work a plug that is not connected to any sort of device that will cause it to work. Simply knowing that some years ago the per share earnings of a company were maybe four or five times of the earnings this year has nearly on significance in showing whether a certain stock should not be bought or if it should be bought. Once again the thing that matter is knowing the background conditions and having an understanding of what will most likely occur over the following several years is of overriding significance.
One thing that investors are constantly being told and informed about is the reports and analysis very focused on the price figures for the past five years. A investor should have in mind that it is in the upcoming five years, not the past five years, that he should be focusing on. One of the reasons that investors are given such a great amount of previous statistics is because of this kind of material is placed on paper and on a report, it not difficult to be sure the information is accurate. If these reports were to focus on more important issues, the following events might make the report look a little bit ridiculous. Because of this, there is always the temptation of filling up more space with facts that the investor will not be able to argue against, even if they are facts that are not significant. Nonetheless there are a lot of individuals that do put a lot of weight and importance on this kind of “past years” statistics for a whole other cause. These people do not seem able to see or realize how much of a change is able to occur in just a matter of a few years in the actual value of certain kinds of modern corporations. As a result they have a tendency of focusing the former earnings records in a true belief that the exact accounting descriptions of what occurred last year is going to provide them with a real inside view of what is going to happen the following year. It is possible that this might be true for certain kinds of regulated companies like those of public utilities. However, for the kind of enterprise that the investor that is looking for the best results for his money should be interested in, it can be totally far from the truth.