Growth versus Value Stocks Happiest Days for Yacht Owners

Gyrating Earnings

It is the nature of businesses that earnings are going to gyrate. But Wall Street forces companies to be consistent. They want consistency and they are willing to reward consistency. But the reality of the business world is it is very non-linear and there are a number of factors that affect cash flow and profitability. In fact even Microsoft themselves admitted a couple of years back that they had smoothed earnings all the way through. So if a business like Microsoft doesn't naturally have smooth predictable earnings, then no business does. And so when you are see that in a statement you are looking at a fairy tale.