Value Investing News

Wall Street is infatuated with EPS. If a company beats their estimates, the stock price is pushed up higher despite the fact that earnings is so easily manipulated by different accounting methods and hiding and/or delaying expenses.

Taxes also play a big role in the final EPS.

A company with a 40% tax rate one year, paying at 35% the next will create the illusion that growth has exceeded expectations, when in fact, the business did nothing but just get a tax break. The opposite is the same.

• http://www.oldschoolvalue.com/valuation-methods/earnings-eps-tax-rate/ (223)