Estimating Preferred Procedure

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Presentation transcript:

Estimating Preferred Procedure Sales Growth Expenses Taxes Shares Outstanding EPS

Agenda Review making EPS growth projections (the un-preferred way) Introduction to the Income Statement The Preferred Procedure The calculations Using the Preferred Procedure in the SSG Plus BetterInvesting online tool Guidelines for judgements

Let the Computer do the Work

Why use the Preferred Procedure? Sales growth often more regular and predictable than earnings growth. Tax rate change due to 2017 tax law (short-term). Most companies do not have preferred stock. Focus on sales growth, % PTP, and number of outstanding shares available.

Why use the Preferred Procedure? Forces us to think about how a company currently makes money and will grow. Understand the Business Model Increases confidence in earnings projection. Earnings growth based on applying logic to what you know about the business. Reduces reliance on analysts.