Earnings power can be helpful, but it cannot anticipate everything
What is the meaning of earnings power?
If we can name the people who have a significant say on buying and selling recommendations, they should be equity analysts. Their words make a substantial impact when assessing a company’s earning power and whether its stocks are worth the investment or not. Of course, they are not called analysts for no reason. Their assessments are always based on facts. However, what is the meaning of earnings power? Earnings power refers to something that shows us a company’s capability to make profits in the long run. This is with the assumption that the company can maintain all current operational conditions.
This is the basic earning power formula, also known as the basic earning power ratio, which we can use:
BEP = EBIT/ Total Assets
Where:
BEP=...