tag:blogger.com,1999:blog-7294165939647321702.post3968095240318602249..comments2024-03-28T13:45:43.362-04:00Comments on <center><a href="http://www.barelkarsan.com">Barel Karsan - Value Investing</a></center>: Earnings Power When Assets ChangeSaj Karsanhttp://www.blogger.com/profile/04493152766022812984noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-7294165939647321702.post-18213394805294125272011-07-03T16:20:40.858-04:002011-07-03T16:20:40.858-04:00Hi Richard,
I agree with you in general, but with...Hi Richard,<br /><br />I agree with you in general, but with the caveats discussed in the article. If a company has sold off assets, it cannot earn its average profits of the past. Also, if it sells commodities with very long cycles, it's very difficult to say that average earnings are that relevant.Saj Karsanhttps://www.blogger.com/profile/04493152766022812984noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-83588098318002281712011-07-01T09:56:57.802-04:002011-07-01T09:56:57.802-04:00Hi Saj, its just your emphasis on only applying th...Hi Saj, its just your emphasis on only applying the technique to stable industries. To take the argument to the extreme if earnings are perfectly stable there's no need to average them, or compute average earnings from past profitability. So, while cyclical industries are less predictable I think using average profitability is most useful in these cases.Richard Beddardhttp://blog.iii.co.uk/noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-66274568274847366442011-06-27T14:29:22.121-04:002011-06-27T14:29:22.121-04:00Hi Richard,
I agree that past profitability is mo...Hi Richard,<br /><br />I agree that past profitability is more useful than average earnings and one-year earnings. Where did I write that it should not be used? I will correct it if it is unclear.Saj Karsanhttps://www.blogger.com/profile/04493152766022812984noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-57171516563660210722011-06-23T09:41:53.900-04:002011-06-23T09:41:53.900-04:00I agree, and have said much the same thing ( http:...I agree, and have said much the same thing ( http://blog.iii.co.uk/a-better-long-term-pe/ ).<br /><br />But I'm curious to hear you say average past profitability should not be used for cyclical companies. It might be less predictive if a company is cyclical, but surely it still has some value. More than say average earnings, or one year's earnings?Richard Beddardhttp://blog.iii.co.uk/noreply@blogger.com