What is a stock's earnings variability?

by augustus.ziemann , in category: Stocks and Equities , a year ago

What is a stock's earnings variability?

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1 answer


by kimberly , a year ago


A stock's earnings variability refers to the fluctuations or volatility in its earnings over a period of time. It measures the degree to which a company's earnings deviate from its average or expected earnings.

Earnings variability can be influenced by various factors such as economic conditions, industry dynamics, market competition, company-specific events, and management decisions. Companies with higher earnings variability are considered riskier as their earnings can be more unpredictable and subject to significant fluctuations. Conversely, companies with lower earnings variability are often considered more stable and reliable.

Investors and analysts typically assess a company's earnings variability to determine the level of risk associated with an investment. Higher earnings variability may indicate higher potential for both positive and negative surprises in earnings, while lower earnings variability suggests more steady and stable earnings.