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Description: There are lots of ways to measure profitability. Many investors fixate on a company’s earnings growth, especially for one-year or five-year periods. I have nothing against that measure — well, wait a moment, I do. It is too sensitive to the starting point, making companies look unduly strong when they are coming off a bad year, or unfairly weak when the base year is an especially prosperous one.


Date: 9/14/2009

Keys: Financial analysis, metrics, investing, stock market


Questions for discussion:

  • What do you think of these metrics as a means for evaluating stock values? Explain your answer.
  • Which one do you believe is the best indicator of corporate success? Explain your thinking.

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