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Definition

The past earnings of a company going back over many years. Examining a company's profit history should be a key part of a private investor's investigations. The profit history shows whether the company ever made a loss and whether its profits are rising or falling after taking into account the inflation rate. The steadiness of a company's profits will also determine its market rating which will be reflected in its price:earnings multiple. Ideally, a company should grow its annual earnings by, say, 15% per annum consistently over many years. Such a profit history would mean that investors (especially the big institutions) are will to pay far more for those earnings than for the earnings of a company which has an erratic profit history.

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