When it comes to starting, building, buying or investing in a business, it is imperative to seek out a strong track record of earnings in order to Build a Small Business That Warren Buffett Would Love. Why? Because with consistency comes predictability and with predicabilty comes the assurance that the business can repeat the past and has the potential to increase the overall company value. A business with earnings can potentially retain the earnings and reinvest them in high yielding projects that will continue to increase the overall company earnings and value.
Without predictability, it is difficult to project the future value of the business with any sort of reliability.
What We Want to See
Coke's ten-year earnings per share track record is as follows:
This appears to be a nice and steady, growing earnings record. It appears to be reliable and growing at a 13.7% clip. This is the type of record to seek out in an investment or any type of acquistion or start-up scenario. It might not be on a per share basis, but nonetheless, the pattern should be the same.
As Opposed To ...
This. You do not want to see this. It looks like the track layout of Space Mountain.
Again, the reason this is so important is because well, number one, the company is making money and two, it will now be possible to run valuation formulas as mentioned in the book Building A Small Business That Warren Buffett Would Love and come up with a future value for the business and a present value price tag. Earnings are penultimate in identifying a healthy business that has lasting power.
Again ... this is what we want to see in the earnings picture:
It is the picture of earnings that makes Coke even more delicious and refreshing. 
Available at Amazon.com and BarnesandNoble.com.
Posts
No comments:
Post a Comment