Consult Log Scale Weekly Graphs

One reason that logarithmic scale graphs are of such great value in security analysis is that acceleration or deceleration in the percentage rate of quarterly earnings increases can be seen very clearly on a log graph.

Log graphs show percentage changes accurately, since one inch anywhere on the price or earnings scale represents the same percentage change. This is not true of arithmetically scaled charts.

For example, a 100% stock price increase from $10 to $20 a share would show the same space change äs a 50% increase from $20 to $30 a share on an arithmetically scaled chart. A log graph, however, would show the 100% increase äs twice äs large äs the 50% increase. The principle of earnings acceleration or deceleration is essential to understand.
Fundamental security analysts who recommend Stocks because of an absolute level of earnings expected for the following year could be looking at the wrong set of facts. A stock that earned $5 per share and expects to report $6 the next year can mislead you unless you know the previous trend in the percentage rate of earnings change Read More

To say the security is undervalued just because it is selling at a  ertain price-earnings ratio or because it is in the low range of its historical P/E ratio is also usually nonsense unless primary consideration has first been given to whether the momentum and rate of change in earnings is substantially increasing or decreasing.

Perhaps this partially explains who so few public or institutional investors, such as banks and insurance companies, make worthwhile money following the buy-and-sell recommendations of most securities analysts. You, as a do-it-yourself investor, can take the latest quarterly earnings per share, add them to the prior three quarters' earnings of a company, and plot the amounts on a logarithmic scale graph. The plotting of the most recent twelve-month earnings each quarter should, in the best companies, put the earnings per share close to or already at new highs.