How do I complete an SSG on a company with negative earnings?
If the company you are studying has negative earnings per share (EPS) for the last fiscal year or the trailing twelve months (TTM), then EPS projections are harder to make.
Calculating a compound annual growth rate (CAGR) from a negative starting point and expecting a positive value is mathematically impossible.
In general, if the company you are studying has multiple years of negative annual EPS, then this company is not a candidate for using the Stock Selection Guide™ (SSG™).
If the company is a quality growth company with a history of consistent earnings and has negative EPS due to a one-time event such as extraordinary taxes or effects of the pandemic, here are the workarounds you can try:
- Adjust your projection starting point to start at the end of the Trend line, which is likely to be positive. It may be helpful to remove the most recent fiscal year EPS from the graph to adjust the end of the trend line to a reasonable starting point. Then enter an EPS growth projection, drag the EPS Projection line on the graph until you achieve the desired future EPS value, or enter the desired future EPS value in the Forecast High Price calculation.
- If the last fiscal year's EPS is positive, then change your projection starting point to Annual.
- If the company has posted adjusted EPS that excludes the effects of the one-time event, then change the EPS data in the tools to the adjusted EPS number from the company report. The data adjustment is likely to change the annual or TTM EPS to a positive value.