Ramifications of High-Class Problems Pick a Good Business to Avoid Random Catalysts

Evaluate a Company’s Earnings Power, not Current Earnings

I look for companies that may be losing a bit of money, break-even or even a bit negative cash flow, but where two to three years out you can get $1 worth of earnings power for every $5 in stock price. Most investors worry about next quarter, not what will be in two to three years, so that’s why these stocks can be so cheap relative to the longer-term earnings power. Companies eventually get priced on earnings power, not current earnings.
Source: http://www.valueinvestorinsight.com/