earnings variability

Earnings Variability

1. Differences in a publicly traded company's year-on-year earnings or earnings per share in both positive and negative directions. Earnings variability is sometimes considered a negative sign as investors do not know whether the company's earnings in one year can be sustained in the next. This can lead to a low P/E ratio as high earnings in a given year do not equate to an increase in share price. It is the opposite of earnings momentum.

2. The amount a worker's wages or salary change from year to year. Earnings variability can occur due to a job change, among other reasons. Between 2003 and 2007, approximately one in five workers saw their earnings increase by 25% or more and one in five saw them decrease by the same amount.

earnings variability

Fluctuations in a corporation's net income or earnings per share during a given period. Past earnings variability is generally considered undesirable because it makes investors less certain of future earnings per share and dividends. As such, a history of earnings variability may be expected to penalize a firm's stock with a lower-than-average price-earnings ratio.
References in periodicals archive ?
This higher commercial lending exposure was also the driver of greater earnings variability and asset quality performance over the last two years.
An important result stems from the very strong negative correlations between the earnings variability (EDV) and the holding period return (REF), and the very strong negative correlations between the earnings variability (EDV) with the other four measures of financial performance (revenue growth (HSG), earnings per share growth (HEG), earnings per share (CNE), net earnings on revenue (NPS), and return on equity, (ROE)).
These announcements are awaited to see if earnings are changing, not if the associated earnings variability is changing.
Other control variables include size, growth, profitability, tangibility, age, earnings variability, debt service capacity, dividend payout ratio, non-debt tax shields, degree of operating leverage, price-earnings ratio, promoter shareholdings, tax rate and uniqueness.
Firms with less earnings smoothing exhibit more earnings variability. The incentive to manipulate earnings upward is reduced for large corporations assumed to be more politically sensitive.
(2007), 'Trends in earnings variability over the past 20 years', Washington DC, Congressional Budget Office, U.S.
VAR = 5 years earnings variability prior to the debt contract; computed as the standard deviation of firm i's net income before extraordinary items (scaled by total assets) measured over rolling five year windows.
The panel regression OLS and Fixed Effect models include return on assets, earnings variability, net total assets, firm age and firm growth rate as control variables.
This comprehensive data set throws up some very interesting findings, including lower earnings variability by those with higher lifetime earnings, and that married individuals enjoy retirement wealth that is less sensitive to earnings variability than those who are not married.
VAR = Earnings variability measured by the dispersion in analysts' earnings forecasts available on I/B/E/S during the fiscal year-end month;
data that there is a negative relationship between earnings variability and earnings management.
They find that "since 1980, the trend in year-to-year earnings variability has been roughly flat." The amount of variability in the average individual's income hasn't budged since the 1990s, or even the 1980S.