Nothing Is More Important Than Strong Earnings

Quality is as quality does, and the only clear way to know if a company has continued growth potential is through its earnings. This metric takes on increased importance when the earnings are strong not only during the most recent or current quarter, but are also predicted to be higher for successive quarters.

A track record for current and future earnings growth does two things. First, it keeps the individual trader from worrying so much about potential negative earnings surprises from the company at some unexpected later date. Just as importantly, it creates interest on the part of institutions, which pay special attention to superior results, and will pay a premium for the stocks of these companies.

In the end, institutional investors drive the market and the price of the stock, not individual investors, and no other consideration is more important that a company’s earnings.