Look-Through Earnings

  

Categories: Accounting

“What were the real earnings? Like…to evaluate how well or poorly the company is doing—and what price per share we should be paying for their stock—we have to look through this one time blip wherein Russia ordered 140,000 Putin Love Dolls. Yes, they blow up. They’re snuggly. Women and roughly 10% of men wanted them.

So the company made them and sold them. But this number was a blip. Putin dolls won’t be hot forever, even if the politician is. So if we look through this one blip, which contributed a buck a share in earnings, then the $1.40 a share in total that the company printed wasn’t actually all that good. Without the blip, the Street had expected 65 cents. We have to look through those one-ish time events in earnings. Maybe a Trump doll next year changes things. Maybe not.

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Finance: How do you forecast earnings?4 Views

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and finance Allah shmoop How do you forecast earnings All

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right we'LL ask an old Wall Street warhorse and you'LL

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get the joke about first putting on blindfolds spinning around

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three times and sniffing for a donkey's butt Yeah but

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the process really isn't that opaque You own a football

00:22

stadium a small one seat seven thousand people and caters

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to a large pacifist organisation that loves the game but

00:30

wants to see tackles replaced by light feathery taps You

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have football if you can still call it that in

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the fallen winter Baseball in the summer a few concerts

00:40

weddings and bar mitzvahs Owen A rodeo or two You

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only sell seeds for anything about one hundred days a

00:46

year like you don't sell many Tuesday nights in the

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winter And City Ordinance doesn't allow you to sell tickets

00:52

in the summer when the weather forecast is supposed to

00:54

be over one hundred degrees because your power grid usage

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would then blow out the city's electricity Your average seat

01:01

ticket net to you is thirty bucks net because you

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pay five dollars commission to StubHub Ticketmaster and while other

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vendors to market your local wears so they retail for

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thirty five each but you keep thirty and on average

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when you do sell a night you sell five thousand

01:15

tickets The stadium is rarely sold out so it plunks

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along with a total of one hundred nine times five

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thousand seats on average sold which is a total of

01:24

El half A million seats Seat units sold per year

01:27

at an average ticket price of thirty bucks to you

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Well revenues last year were about fifteen million dollars In

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addition you sell recycled but boiled horse hooves which you

01:37

call hot dogs along with Coke Fear popcorn and Candy

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Floss which is actually floss you can use to get

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those horse hooves out of your teeth They really stick

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in there at another two million bucks in revenue for

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all that stuff And that's what you had in revenues

01:50

last year Well what about costs Well when you had

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your light hitting baseball in football teams you had to

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pay licensing fees for them Tio you know show up

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of three million dollars a year for the other events

02:01

like concerts and weddings and bar mitzvahs He only had

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incremental cleanup costs for beer spillage and vomit of about

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two million dollars And your quote food unquote costs were

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another million You had insurance electricity legal and well other

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bills totaling another million box You had total expenses then

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of seven million dollars and made pretax ten million dollars

02:24

So you had total expenses of seven million box He

02:26

had seventeen million of revenue with seventeen money Seven Its

02:29

pretax ten million dollars on the set of calculations is

02:33

a kind of forensic starting place in forecasting future earnings

02:36

And you start with a spreadsheet This thing like Well

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what happens to pre tax profits if you can average

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thirty four dollars a ticket instead of thirty a ticket

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Well there you go What if you average fifty eight

02:47

hundred seats sold instead of five thousand OK well we're

02:51

trying to forecast earnings here So is that what you

02:53

think you'LL actually earn Or just what you hope you'LL

02:57

earn Well forecasting earnings is all about being real not

03:00

hopeful Meaning you try to be porridge Not too hot

03:04

not too cold but actually accurate So if you're suddenly

03:07

going to grow from five thousand to fifty eight hundred

03:11

seats on average sold over one hundred ninety year than

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What changed Did Amazon build a new warehouse in the

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neighbourhood Do you expect many tall women to be attending

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ballparks now Is Oprah showing up to every event and

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giving out free human days What happened Maybe there's a

03:27

new popular glow in the dark cotton candy that actually

03:29

makes you glow in the dark It doesn't glow but

03:32

it makes you glow You make another mil for selling

03:35

it or you think you will Maybe Well how do

03:37

you forecast What data do you put in What assumptions

03:40

did you make Well in this sense the qualitative factors

03:43

that make up your predictions are everything in that the

03:46

numbers well that you just randomly type in could be

03:49

almost anything But if they're not accurate numbers or reflective

03:52

of well the nation's new love affair with pickled horses

03:55

or whatever is driving you to new heights and profitability

03:58

well than it best there just hopes Nay pipe dreams 00:04:02.493 --> [endTime] Yeah don't do that

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