S&P 500   5,078.18 (+0.17%)
DOW   38,972.41 (-0.25%)
QQQ   437.60 (+0.24%)
AAPL   182.63 (+0.81%)
MSFT   407.48 (-0.01%)
META   487.05 (+1.10%)
GOOGL   138.88 (+0.95%)
AMZN   173.54 (-0.68%)
TSLA   199.73 (+0.17%)
NVDA   787.01 (-0.49%)
NIO   5.78 (+2.30%)
AMD   178.00 (+1.13%)
BABA   77.68 (+1.53%)
T   16.84 (+1.39%)
F   12.01 (+0.50%)
MU   91.85 (+2.67%)
CGC   3.53 (+1.73%)
GE   153.99 (-0.50%)
DIS   109.45 (+1.64%)
AMC   4.81 (+7.86%)
PFE   26.89 (-1.07%)
PYPL   60.16 (+1.40%)
XOM   104.03 (-0.21%)
S&P 500   5,078.18 (+0.17%)
DOW   38,972.41 (-0.25%)
QQQ   437.60 (+0.24%)
AAPL   182.63 (+0.81%)
MSFT   407.48 (-0.01%)
META   487.05 (+1.10%)
GOOGL   138.88 (+0.95%)
AMZN   173.54 (-0.68%)
TSLA   199.73 (+0.17%)
NVDA   787.01 (-0.49%)
NIO   5.78 (+2.30%)
AMD   178.00 (+1.13%)
BABA   77.68 (+1.53%)
T   16.84 (+1.39%)
F   12.01 (+0.50%)
MU   91.85 (+2.67%)
CGC   3.53 (+1.73%)
GE   153.99 (-0.50%)
DIS   109.45 (+1.64%)
AMC   4.81 (+7.86%)
PFE   26.89 (-1.07%)
PYPL   60.16 (+1.40%)
XOM   104.03 (-0.21%)
S&P 500   5,078.18 (+0.17%)
DOW   38,972.41 (-0.25%)
QQQ   437.60 (+0.24%)
AAPL   182.63 (+0.81%)
MSFT   407.48 (-0.01%)
META   487.05 (+1.10%)
GOOGL   138.88 (+0.95%)
AMZN   173.54 (-0.68%)
TSLA   199.73 (+0.17%)
NVDA   787.01 (-0.49%)
NIO   5.78 (+2.30%)
AMD   178.00 (+1.13%)
BABA   77.68 (+1.53%)
T   16.84 (+1.39%)
F   12.01 (+0.50%)
MU   91.85 (+2.67%)
CGC   3.53 (+1.73%)
GE   153.99 (-0.50%)
DIS   109.45 (+1.64%)
AMC   4.81 (+7.86%)
PFE   26.89 (-1.07%)
PYPL   60.16 (+1.40%)
XOM   104.03 (-0.21%)
S&P 500   5,078.18 (+0.17%)
DOW   38,972.41 (-0.25%)
QQQ   437.60 (+0.24%)
AAPL   182.63 (+0.81%)
MSFT   407.48 (-0.01%)
META   487.05 (+1.10%)
GOOGL   138.88 (+0.95%)
AMZN   173.54 (-0.68%)
TSLA   199.73 (+0.17%)
NVDA   787.01 (-0.49%)
NIO   5.78 (+2.30%)
AMD   178.00 (+1.13%)
BABA   77.68 (+1.53%)
T   16.84 (+1.39%)
F   12.01 (+0.50%)
MU   91.85 (+2.67%)
CGC   3.53 (+1.73%)
GE   153.99 (-0.50%)
DIS   109.45 (+1.64%)
AMC   4.81 (+7.86%)
PFE   26.89 (-1.07%)
PYPL   60.16 (+1.40%)
XOM   104.03 (-0.21%)

Earnings Beats and Misses

Wall Street equities research analysts issue quarterly earnings per share (EPS) estimates for most publicly-traded companies. The average of their EPS estimates is often referred to as the consensus EPS estimate. When companies actual earnings vary significantly from analysts' earnings estimates, this is referred to as an earnings surprise. This report shows the companies that have beat or missed analysts' earnings expectations by the largest margin during the last 90 days. Learn more about earnings surprises.

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CompanyEarnings DateConsensus EPSActual EPSBeat/MissRevenue EstimateActual RevenueActions
Markel Group stock logo
MKL
Markel Group
1/31/2024$23.58$56.48$32.90$3.75 billion$3.71 billion
Valaris stock logo
VAL
Valaris
2/21/2024$0.29$11.30$11.01$484.00 million$483.80 million  
Visteon stock logo
VC
Visteon
2/20/2024$2.09$13.01$10.92$1.05 billion$990.00 million      
Everest Group stock logo
EG
Everest Group
2/7/2024$14.63$25.18$10.55$3.85 billion$3.66 billion    
Precision Drilling stock logo
PDS
Precision Drilling
2/6/2024$1.99$9.81$7.82$362.16 million$506.87 million  
Cable One stock logo
CABO
Cable One
2/22/2024$13.02$19.39$6.37$418.65 million$411.80 million    
Brookfield Business Partners stock logo
BBU
Brookfield Business Partners
2/2/2024$0.90$6.57$5.67N/A$13.41 billion    
MicroStrategy stock logo
MSTR
MicroStrategy
2/6/2024($0.64)$4.96$5.60$132.97 million$124.48 million    
AXIS Capital stock logo
AXS
AXIS Capital
1/31/2024($1.25)$2.94$4.19$1.42 billion$1.46 billion
Alpha Metallurgical Resources stock logo
AMR
Alpha Metallurgical Resources
2/26/2024$8.78$12.88$4.10$796.65 million$959.90 million      
IAC stock logo
IAC
IAC
2/13/2024($0.20)$3.70$3.90$1.06 billion$1.06 billion  
Deckers Outdoor stock logo
DECK
Deckers Outdoor
2/1/2024$11.40$15.11$3.71$1.45 billion$1.56 billion      
Genmab A/S stock logo
GMAB
Genmab A/S
2/14/2024$0.34$3.99$3.65$678.14 million$675.29 million  
RenaissanceRe stock logo
RNR
RenaissanceRe
1/30/2024$8.13$11.77$3.64$1.83 billion$1.59 billion    
Treasure Global stock logo
TGL
Treasure Global
2/14/2024($5.60)($2.10)$3.50$18.39 million$6.71 million  
Chubb stock logo
CB
Chubb
1/30/2024$5.07$8.30$3.23$12.88 billion$13.38 billion
Toyota Motor stock logo
TM
Toyota Motor
2/6/2024$3.66$6.76$3.10$73.72 billion$81.54 billion
Two Harbors Investment stock logo
TWO
Two Harbors Investment
2/6/2024($3.13)($0.06)$3.07N/A$122.40 million  
Cheniere Energy stock logo
LNG
Cheniere Energy
2/22/2024$2.70$5.76$3.06$4.37 billion$4.82 billion    
Avis Budget Group stock logo
CAR
Avis Budget Group
2/13/2024$4.15$7.10$2.95$2.81 billion$2.76 billion      
Centrus Energy stock logo
LEU
Centrus Energy
2/8/2024$0.78$3.58$2.80$61.05 million$103.60 million
Trip.com Group stock logo
TCOM
Trip.com Group
2/21/2024$0.34$3.12$2.78$10.22 billion$10.34 billion    
AutoZone stock logo
AZO
AutoZone
2/27/2024$26.18$28.89$2.71$4.32 billion$3.86 billion  
Huntington Ingalls Industries stock logo
HII
Huntington Ingalls Industries
2/1/2024$4.27$6.90$2.63$2.78 billion$3.18 billion      
CNX Resources stock logo
CNX
CNX Resources
1/25/2024$0.30$2.89$2.59$401.62 million$999.50 million    
Booking stock logo
BKNG
Booking
2/22/2024$29.72$32.00$2.28$4.71 billion$4.78 billion      
Berkshire Hathaway stock logo
BRK.B
Berkshire Hathaway
2/24/2024$1.78$3.92$2.14$76.73 billion$93.38 billion
Dillard's stock logo
DDS
Dillard's
2/26/2024$11.59$13.69$2.10$2.08 billion$2.12 billion
Allstate stock logo
ALL
Allstate
2/8/2024$3.87$5.82$1.95$12.69 billion$14.83 billion    
Travelers Companies stock logo
TRV
Travelers Companies
1/19/2024$5.10$7.01$1.91$10.18 billion$10.93 billion    
The Goldman Sachs Group stock logo
GS
The Goldman Sachs Group
1/16/2024$3.62$5.48$1.86$10.80 billion$11.32 billion    
Marathon Petroleum stock logo
MPC
Marathon Petroleum
1/30/2024$2.21$3.98$1.77$34.90 billion$36.26 billion    
Navios Maritime Partners stock logo
NMM
Navios Maritime Partners
2/13/2024$2.58$4.32$1.74$322.00 million$327.50 million    
Bread Financial stock logo
BFH
Bread Financial
1/25/2024($0.67)$0.90$1.57$984.36 million$1,000.00 million    
Urban Edge Properties stock logo
UE
Urban Edge Properties
2/14/2024$0.31$1.88$1.57N/A$116.58 million    
Marriott International stock logo
MAR
Marriott International
2/13/2024$2.12$3.57$1.45$6.20 billion$6.10 billion    
Piper Sandler Companies stock logo
PIPR
Piper Sandler Companies
2/2/2024$2.61$4.03$1.42$370.12 million$457.39 million    
Piper Sandler Companies stock logo
PIPR
Piper Sandler Companies
2/2/2024$2.61$4.03$1.42$370.12 million$457.39 million    
Moderna stock logo
MRNA
Moderna
2/22/2024($0.78)$0.55$1.33$2.53 billion$2.80 billion    
World Acceptance stock logo
WRLD
World Acceptance
1/19/2024$1.62$2.84$1.22$134.95 million$137.75 million    
Murphy USA stock logo
MUSA
Murphy USA
2/7/2024$5.79$7.00$1.21$5.32 billion$5.07 billion    
TPI Composites stock logo
TPIC
TPI Composites
2/22/2024($0.91)$0.27$1.18$340.91 million$296.99 million    
Intelligent Bio Solutions stock logo
INBS
Intelligent Bio Solutions
2/9/2024($3.24)($2.07)$1.17N/A$0.76 million
Coinbase Global stock logo
COIN
Coinbase Global
2/15/2024($0.09)$1.04$1.13$826.10 million$953.80 million      
Regeneron Pharmaceuticals stock logo
REGN
Regeneron Pharmaceuticals
2/2/2024$10.73$11.86$1.13$3.29 billion$3.43 billion    
Tenet Healthcare stock logo
THC
Tenet Healthcare
2/8/2024$1.58$2.68$1.10$5.28 billion$5.38 billion    
NOV stock logo
NOV
NOV
2/2/2024$0.41$1.51$1.10$2.26 billion$2.34 billion    
Clorox stock logo
CLX
Clorox
2/1/2024$1.08$2.16$1.08$1.80 billion$1.99 billion      
Liberty Broadband stock logo
LBRDA
Liberty Broadband
2/16/2024$2.37$3.44$1.07$250.00 million$250.00 million  
Atkore stock logo
ATKR
Atkore
2/1/2024$3.08$4.12$1.04$777.05 million$798.50 million    
Deere & Company stock logo
DE
Deere & Company
2/15/2024$5.19$6.23$1.04$10.30 billion$10.49 billion    
The PNC Financial Services Group stock logo
PNC
The PNC Financial Services Group
1/16/2024$2.12$3.16$1.04$5.30 billion$5.36 billion    
Equinix stock logo
EQIX
Equinix
2/14/2024$6.26$7.30$1.04$2.11 billion$2.11 billion    
Shimmick stock logo
SHIM
Shimmick
12/19/2023$0.65$1.67$1.02$173.00 million$175.45 million  
MDU Resources Group stock logo
MDU
MDU Resources Group
2/8/2024$0.49$1.50$1.01$1.23 billion$1.14 billion  
Powell Industries stock logo
POWL
Powell Industries
1/30/2024$1.00$1.98$0.98$182.04 million$194.00 million      
AutoZone stock logo
AZO
AutoZone
12/5/2023$31.57$32.55$0.98$4.19 billion$4.19 billion    
NVIDIA stock logo
NVDA
NVIDIA
2/21/2024$4.21$5.16$0.95$20.40 billion$22.10 billion      
CRISPR Therapeutics stock logo
CRSP
CRISPR Therapeutics
2/21/2024$0.15$1.10$0.95$148.72 million$201.20 million
Kaiser Aluminum stock logo
KALU
Kaiser Aluminum
2/22/2024($0.34)$0.60$0.94$716.01 million$722.00 million    
Corporación Inmobiliaria Vesta stock logo
VTMX
Corporación Inmobiliaria Vesta
2/21/2024$0.40$1.32$0.92N/A$55.94 million  
Cimpress stock logo
CMPR
Cimpress
1/31/2024$1.24$2.14$0.90$901.13 million$921.36 million
Parker-Hannifin stock logo
PH
Parker-Hannifin
2/1/2024$5.26$6.15$0.89$4.82 billion$4.82 billion      
Credit Acceptance stock logo
CACC
Credit Acceptance
1/31/2024$9.17$10.06$0.89$478.80 million$491.60 million
Chesapeake Energy stock logo
CHK
Chesapeake Energy
2/20/2024$0.42$1.31$0.89$962.95 million$1.95 billion    
Bunge Global stock logo
BG
Bunge Global
2/7/2024$2.81$3.70$0.89$14.96 billion$14.94 billion    
Popular stock logo
BPOP
Popular
1/25/2024$1.05$1.94$0.89$699.76 million$702.92 million    
Albemarle stock logo
ALB
Albemarle
2/15/2024$0.99$1.85$0.86$2.18 billion$2.36 billion    
HCA Healthcare stock logo
HCA
HCA Healthcare
1/30/2024$5.05$5.90$0.85$16.51 billion$17.30 billion    
Root stock logo
ROOT
Root
2/21/2024($2.49)($1.64)$0.85$108.00 million$194.80 million    
Affiliated Managers Group stock logo
AMG
Affiliated Managers Group
2/5/2024$6.03$6.86$0.83$524.98 million$502.70 million    
BlackRock stock logo
BLK
BlackRock
1/12/2024$8.84$9.66$0.82$4.65 billion$4.63 billion    
Krystal Biotech stock logo
KRYS
Krystal Biotech
2/26/2024($0.52)$0.30$0.82$27.43 million$42.14 million      
Reliance Steel & Aluminum stock logo
RS
Reliance Steel & Aluminum
2/15/2024$3.92$4.73$0.81$3.31 billion$3.34 billion    
Air Lease stock logo
AL
Air Lease
2/15/2024$1.10$1.89$0.79$672.95 million$716.57 million    
Ternium stock logo
TX
Ternium
2/20/2024$1.32$2.11$0.79$4.94 billion$4.93 billion    
VeriSign stock logo
VRSN
VeriSign
2/8/2024$1.83$2.60$0.77$377.93 million$380.40 million    
CONSOL Energy stock logo
CEIX
CONSOL Energy
2/6/2024$4.28$5.05$0.77$608.90 million$649.90 million      
Wynn Resorts stock logo
WYNN
Wynn Resorts
2/7/2024$1.15$1.91$0.76$1.74 billion$1.84 billion    
Regis stock logo
RGS
Regis
1/31/2024($1.19)($0.43)$0.76$52.94 million$51.05 million      
TransDigm Group stock logo
TDG
TransDigm Group
2/8/2024$6.41$7.16$0.75$1.68 billion$1.79 billion    
PennyMac Financial Services stock logo
PFSI
PennyMac Financial Services
2/1/2024$1.01$1.76$0.75$413.35 million$361.94 million    
Sage Therapeutics stock logo
SAGE
Sage Therapeutics
2/14/2024($1.28)($0.55)$0.73$60.15 million$77.97 million    
Insulet stock logo
PODD
Insulet
2/22/2024$0.67$1.40$0.73$461.26 million$509.80 million    
FTAI Aviation stock logo
FTAI
FTAI Aviation
2/22/2024$0.37$1.09$0.72$310.04 million$312.74 million      
Ionis Pharmaceuticals stock logo
IONS
Ionis Pharmaceuticals
2/21/2024($0.78)($0.06)$0.72$176.01 million$325.00 million      
Phillips 66 stock logo
PSX
Phillips 66
1/31/2024$2.37$3.09$0.72N/AN/A
Powell Industries stock logo
POWL
Powell Industries
12/5/2023$1.24$1.95$0.71$198.38 million$208.64 million
FTI Consulting stock logo
FCN
FTI Consulting
2/22/2024$1.57$2.28$0.71$840.40 million$924.68 million      
REX American Resources stock logo
REX
REX American Resources
11/30/2023$0.79$1.49$0.70$198.00 million$221.08 million
Carlisle Companies stock logo
CSL
Carlisle Companies
2/6/2024$3.47$4.17$0.70$1.09 billion$1.13 billion    
G-III Apparel Group stock logo
GIII
G-III Apparel Group
12/5/2023$2.08$2.78$0.70$1.13 billion$1.07 billion    
Pegasystems stock logo
PEGA
Pegasystems
2/14/2024$1.07$1.77$0.70$413.79 million$474.23 million  
McKesson stock logo
MCK
McKesson
2/7/2024$7.05$7.74$0.69$77.93 billion$80.90 billion    
Madison Square Garden Entertainment stock logo
MSGE
Madison Square Garden Entertainment
2/7/2024$1.90$2.59$0.69$385.92 million$402.67 million      
Alteryx stock logo
AYX
Alteryx
2/7/2024$0.39$1.06$0.67$337.67 million$351.00 million
Martin Marietta Materials stock logo
MLM
Martin Marietta Materials
2/14/2024$3.96$4.63$0.67$1.62 billion$1.61 billion    
AerCap stock logo
AER
AerCap
2/23/2024$2.44$3.11$0.67$1.94 billion$1.90 billion    
Century Communities stock logo
CCS
Century Communities
1/31/2024$2.27$2.93$0.66$915.91 million$1.21 billion
SITE Centers stock logo
SITC
SITE Centers
2/13/2024$0.26$0.92$0.66$127.81 million$123.20 million    
What is an Earnings Surprise?

Key Points

  • An earnings surprise is defined as higher or lower revenue and/or earnings reported by a company in its earnings report.
  • Earnings surprises can come in four varieties, each with their own meaning for investors.
  • The revenue and earnings forecasts that analysts provide correlate to their overall rating for a stock.
  • Investors should look at the track record of an analyst when assigning a meaning to their revenue and earnings forecasts. 
  • 5 stocks we like better than Coca-Cola

An earnings surprise occurs when a company posts revenue and/or earnings per share or profit that is higher (beat) or lower (miss) than what the analysts that follow the company predict. 

When the earnings beat or miss is significant, it will likely have an impact on the company’s stock price. This price movement can be temporary or it can be a continuation of a trend in place before the company reported earnings. In this article, we’ll take a closer look at earnings surprises, including some of the popular forecasting models that analysts use to estimate the value of a company. 

Overview of Earnings Surprises

Earnings season is a time when a company’s stock price can make outsized movements and an earnings report is like a report card for investors. The Securities and Exchange Commission (SEC) requires every publicly traded company to deliver an earnings report to shareholders on a regular basis, usually quarterly.

This report covers a range of issues that affect business operations. In the financial press, it boils down to the company’s revenue (the top line) and earnings per share, or profit (the bottom line).

Analysts spend extensive time researching a company and cover this type of data. They speak with management, visit facilities and pay attention to macroeconomic conditions that could affect the sector in which that company operates. From there, the analysts post expectations for the company’s revenue and earnings per share for the upcoming period. 

On many occasions, a company reports higher or lower earnings than what analysts expect. These are known as earnings surprises and they can occur on the upside (an earnings beat) or the downside (an earnings miss). 

MarketBeat offers subscribers the MarketBeat earnings screener which could also be used as an earnings surprise screener. That’s because the screener allows you to search for a company’s earnings results based on specific criteria such as whether its earnings per share (EPS) estimate came in higher or lower than the consensus estimate of analysts. 

The next section provides more details about different earnings surprises that investors can expect.  

Breaking Down Earnings Surprises

In addition to providing the raw numbers, companies use their earnings reports as a way to provide guidance about upcoming quarters or the entire year. As a free service, you can find the latest earnings reports from MarketBeat by looking under the tab called “earnings calendar.” 

Don’t forget to review the earnings transcript of the company’s conference call. What are earnings transcripts? They are audio recordings and/or written transcriptions of everything that a company says to analysts and investors after they report earnings. 

Pay close attention to what company management says to understand how it may affect your investment decisions. MarketBeat has a tool that can help you read or listen to many transcripts. MarketBeat also provides tools to help you learn more about earnings guidance data.

There are four types of earnings surprises: a double beat, a double miss, a “beat on revenue but a miss on earnings” and a “miss on revenue but a beat on earnings.” 

The Double Beat

The “double beat” is the most bullish of all outcomes. This means that for the quarter just ended, the company sold more than analysts expected. More importantly, it generated a higher profit. This could mean that its products had a higher profit margin or it could mean that the company has an efficient cost structure that allows more revenue to go to the bottom line. 

In either case, it’s considered bullish for the stock, so you can weigh this against the company’s future guidance. A company may issue a warning that while it beats on revenue and earnings in the current quarter, that trend will not likely continue. In this case, the company’s stock could drop in value. However, if that forward guidance suggests that revenue and earnings will continue to grow, the stock could move much higher.

The Double Miss

Not surprisingly, the “double miss” is the most bearish of all outcomes. This means that the company generated less revenue and profit than the analysts expected. If this is followed by negative guidance, you may want to sell your stock. On the other hand, if the miss was caused by conditions largely outside of the company’s control, you may decide to hang on to the stock, particularly if the company pays a dividend. 

For example, at the onset of the COVID-19 pandemic, many companies saw their stock prices plunge. In the initial quarters, many delivered lower revenue and earnings than forecasted. However, when companies quickly reversed, prudent investors made substantial gains.

Beat on Revenue, Miss on Earnings

A “beat on revenue, miss on earnings” is generally seen as bearish. When a company increases its sales but doesn’t generate as much profit as in prior quarters, it suggests some kind of negative pricing imbalance. In many cases, it signals that the company does not have the pricing power to pass along increasing producer costs to its customers. If the company operates in a highly cyclical sector, this may weigh on the stock for several quarters and may encourage you to sell your shares. 

Beat on Earnings, Miss on Revenue

Conversely, a “beat on earnings, miss on revenue” is seen as neutral to slightly bullish. Obviously, it’s not great for a company to sell fewer products. If the numbers beat profit expectations, it can suggest that the company has a high profit margin and that its customers will pay that premium to own the products. If investors believe that the situation will continue for several quarters, it may be time to buy shares even though the stock may go higher after earnings. 

Earnings Surprises and Analyst Estimates

Let’s take a look at what analysts typically recommend for individual stocks:

  • “Strong buy” or “buy” recommendation: This means that the analyst has made a recommendation for investors to buy a particular stock or security. You can expect a company to beat analysts’ recommendations.
  • “Strong sell” or “sell” recommendation: This means that an analyst has made a recommendation for investors to sell or liquidate their position in a particular stock or security. In this scenario, the revenue and profit estimates already price in this sentiment.
  • “Neutral” or “hold” recommendations: This means analysts have not called for specific buy or sell action. Rather, they give their opinion on the performance of the stock. This rating is given when an analyst expects the stock to perform in a way consistent with the performance of the broader market, or with comparable companies within the analyst’s sector of expertise. This rating could cause the biggest upside or downside from earnings surprises.

In recent years, many analysts have started to add clarity to the expected movement of their stock forecasts using two additional categories:

  • “Underperform” rating: This means the expectation for the stock will perform below the market or sector average. Analysts may use ratings such as "moderate sell,” “weak hold" or “underweight” in place of “underperform.”
  • “Outperform” rating: This is the opposite of an “underperform” rating. Stocks that receive this rating should outperform the market or sector average. Analysts may also substitute words like “moderate buy,” “accumulate” or “overweight.”

As we noted earlier, analysts take the information they receive from company executives as well as their own boots-on-the-ground research to determine a company’s valuation and to determine the economic value of a business.

If you have a background or interest in finance, you may want to look at a company’s balance sheet and do your own calculations. For example, a company’s price-to-earnings (P/E) ratio can be a clue as to whether you should buy a stock. What is price-to-earnings ratio, exactly? That’s when you can rely on the calculations provided by analysts. Here’s a look at some of the more popular valuation models. 

Market Capitalization

You can calculate a company’s market capitalization (or market cap) by multiplying the company’s share price by the total number of shares outstanding. 

For example, on November 7, 2022, The Coca-Cola Company (NYSE: KO) had a share price of $59.45 and 4,324,513,000 shares outstanding. The company’s market cap is determined by the formula 59.45 x 4,324,513,000 to arrive at the company’s market cap of just over $257 billion.

Times Revenue Method

This method assigns a multiplier to a company’s revenues generated over a period of time. The multiplier takes into account the company’s industry and current economic conditions. Tech companies typically have larger multiples than, say, utility companies. 

Earnings Multiplier

This method is similar to the times revenue method but puts the multiplier on earnings instead of revenue. Earnings tend to be a more accurate indicator of a company’s future success than revenue. The earnings multiplier is assigned to a company’s future cash flow that could be invested at the current interest rate over a specified period of time (usually 12 months). 

Discounted Cash Flow (DCF) Method

The discounted cash flow method, a commonly used model, looks similar to the earnings valuation model in that it seeks to project future cash flows to the current market value of the company. This model takes inflation into account. 

Book Value

A company’s book value measures the value of the equity that shareholders have in a company. Book value, shown on a company’s balance sheet, subtracts a company’s total liabilities from its total assets. 

How Much Weight Should Investors Give to Earnings Surprises

The answer to this question depends on what you believe about the accuracy of the earnings estimates. First, consider the accuracy of the information offered by the company. It has become increasingly common for companies to deliver preemptive earnings announcements. 

In the best-case scenario, you may consider it a step toward transparency. On the other hand, analysts can lower expectations that the company can then beat. 

Another factor is analyst objectivity. Prior to the dot-com crash of 2000, brokerage houses and other firms received “soft money” as compensation which led analysts to provide research and issue better ratings than a company would have otherwise merited. One regulation that has emerged since the dot-com crash requires analysts to use commonly accepted valuation techniques in their analysis, such as the factors listed above. This ensures that the methodology they use to assign a value to the company follows generally accepted accounting principles (GAAP). 

However, a more fundamental reason for analysts to be as accurate as possible is their own credibility and that of their firm. To that end, MarketBeat provides an analyst rankings tool that displays the average return on investment (ROI) for every analyst that made a “buy” or “strong buy” recommendation. Investors can sort results by country, sector and market cap. 

Use Earnings Surprises to Your Advantage

An earnings surprise occurs when the revenue and/or profit that a company reports exceeds or falls short of analysts’ estimates. When this occurs, it usually has a proportionate effect on a company’s stock price. That means the larger the beat or miss, the higher or lower the stock price can move.

Analysts use the information they have gathered from closely following the companies to provide investors with accurate revenue and earnings estimates. For a variety of reasons, their numbers may understate or overstate a company’s actual results. 

Use these estimates as a guide and prepare yourself to rethink your own ideas about the company if the earnings report delivers results that contradict your reasons for taking a long or short position in a stock. 

Chris Markoch

About Chris Markoch

  • CTMarkoch@msn.com

Editor & Contributing Author

Retirement, Individual Investing

Experience

Chris Markoch has been an editor & contributing writer for MarketBeat since 2018.

Areas of Expertise

Value investing, retirement stocks, dividend stocks

Education

Bachelor of Arts, The University of Akron

Past Experience

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