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Earnings Growth Stability

Looking at a firm's historical earnings pattern can also help you evaluate management quality. Every company has its bad years, but overall, solid managers manage to turn out relatively consistent earnings growth. Conversely, some firms' roller coaster earnings history cast doubt as to whether management is really in control.

Multex Investor's Highlight report shows you up to four years reported earnings in a format ideally suited to visually evaluate earnings growth stability. It shows each fiscal year's quarterly earnings in a column so that you can compare the same quarter of each year (e.g., March quarter), and thus eliminate seasonal variations. Figure 9-1 shows the recent quarterly earnings history for Caremark Rx, a company with relative stable earnings growth, while Figure 9-2 shows an example of inconsistent earnings.


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