It is properly defined as a rate of earnings which is considered as "normal," or reasonably probable, for the company or particular security.
It should be based both upon the past record, and upon a reasonable assurance that the future will not be vastly different from the past.
Hence companies with highly variable records or especially uncertain futures may not logically be thought of as having a well defined earning power.
However, the term is often loosely used to refer to the average earnings over any given period, or even to the current earnings rate.
Benjamin Graham
Comment:
Invest for the long term earning power of the company to give you compounded returns over many years.
It should be based both upon the past record, and upon a reasonable assurance that the future will not be vastly different from the past.
Hence companies with highly variable records or especially uncertain futures may not logically be thought of as having a well defined earning power.
However, the term is often loosely used to refer to the average earnings over any given period, or even to the current earnings rate.
Benjamin Graham
Comment:
Invest for the long term earning power of the company to give you compounded returns over many years.
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