Earnings may be cyclical, or even inconsistent, and still have some permanence.
- Many automobile companies have notoriously cyclical results; yet they have managed to keep up an ongoing business over many years.
Benjamin Graham considered a company to have stable earnings when:
- earnings doubled in the most recent 10 years, and,
- earnings declined by no more than 5% no more than twice in the past 10 years.
- Stability is assessed by the trend of per-share earnings over a ten-year period, compared to the average of the most recent three years.
- No decline represents 100% stability.
- 5.22 (1984); 6.25; 6.31;.5.90; 5.08; 1.36; 0.30; -2.7, 1.38, 6.77; and 10.1 (1994)
- 10-year average = $4.95
- 3-year average = $6.08
- 1994 book value = $46.65 per share
- 1995 trading range = $38.25 to $58.13 per share