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   StarMine's concept of "Preferred Earnings"
  
For most securities, analysts issue estimates of multiple income statement items. Depending on the company, any one of several income statement items might be viewed as the most useful measure of the company's "earnings." The item most frequently viewed as the most valuable measure is EPS, or earnings per share. But in certain industries and countries, measures other than EPS better reflect the earnings of a company or are more widely accepted by analysts and investors. For example, the North American real estate industry favors FFO, or funds from operations, over EPS.

Because of these differences in the relative importance of the various income statement items, StarMine has created a system whereby we select a "preferred" earnings measure for each security. The Preferred Earnings measure for a security is used in the Analyst Revisions Model calculation, and is also used as the default estimate type on the Ticker/Estimates page. "Preferred Earnings" can also be selected on the Ticker Digest or on the Edit Screens page to indicate that you are interested in "earnings" in a general sense, rather than in a particular income statement item for all stocks regardless of its appropriateness for all stocks.

In some countries, StarMine permanently sets EPS as the Preferred Earnings measure for all of the securities in that country. In other countries, StarMine's approach to determining the Preferred Earnings measure for a security is to compare the number of analysts issuing estimates across multiple measures. In these instances, we will set and maintain the Preferred Earnings measure independently for each security based on the following procedure:
  1. We examine the security's current estimate data for this year and next year and determine, based on specified rules for the security's country (and possibly its industry), which measure is most appropriate to use as the Preferred Earnings measure for that security.
  2. We set the Preferred Earnings measure for the security based on our findings. The Preferred Earnings measure is set once for each security; it isn't possible for it to vary depending on the fiscal period.
  3. We re-examine the data on a monthly basis to confirm that the existing Preferred Earnings measure remains consistent with the specified rules. We examine monthly rather than daily to avoid repeatedly changing a security's Preferred Earnings measure.
  4. If the new data suggests changing the security's Preferred Earnings measure, we change it accordingly.
Here are some of the rules we use when setting a security's Preferred Earnings measure:
  • For a U.S. security, set the Preferred Earnings measure to EPS unless there are more FFO estimates than EPS estimates. If there are more FFO estimates than EPS estimates, set the Preferred Earnings measure to FFO.
  • For a Canadian security in the Real Estate industry, set the Preferred Earnings measure to FFO unless there are more EPS estimates than FFO estimates. If there are more EPS estimates than FFO estimates, set the Preferred Earnings measure to EPS.
  • For a Canadian security in the Oil & Gas, Metals & Mining, or Trading industries, set the Preferred Earnings measure to Cash Flow unless there are many more EPS estimates than Cash Flow estimates. If there are many more EPS estimates than Cash Flow estimates, set the Preferred Earnings measure to EPS.
  • For a Japanese security, set the Preferred Earnings measure to Operating (OPR) unless there are at least 50% more EPS or Parent OPR estimates than OPR estimates. If there are at least 50% more EPS or Parent OPR estimates than OPR estimates, set the Preferred Earnings measure to either EPS or Parent OPR.
  • For a Taiwanese security, set the Preferred Earnings measure to EPS unless there are at least 25% more Parent EPS estimates than EPS estimates. If there are at least 25% more Parent EPS estimates than EPS estimates, set the Preferred Earnings measure to Parent EPS.
  • For a Korean security, set the Preferred Earnings measure to Parent EPS unless there are at least 100% more EPS estimates than Parent EPS estimates. If there are at least 100% more EPS estimates than Parent EPS estimates, set the Preferred Earnings measure to EPS.
  • For an Indian security or a Thai security, set the Preferred Earnings measure to EPS unless there are at least 100% more Parent EPS estimates than EPS estimates. If there are at least 100% more Parent EPS estimates than EPS estimates, set the Preferred Earnings measure to Parent EPS.

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