Excess Returns A Deep Dive Into Earnings Quality with Columbia Professor Doron Nissim
38 snips
Feb 16, 2023 AI Snips
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Sustainable Earnings Drive Valuation
- Earnings quality primarily means earnings are sustainable and can be expected again in the future.
- Sustainable earnings align closely with company valuation methods like relative valuation and DCF.
Accounting Standards Increase Earnings Volatility
- Modern accounting standards increase earnings volatility by emphasizing fair value and impairment tests.
- This volatility reduces the sustainability of earnings, complicating future earnings prediction.
Importance of High Quality Earnings
- High quality earnings mean sustainable earnings power and less likelihood of manipulation.
- Manipulated earnings can lead to costly negative surprises and diminished future earnings.