The Debate on Overemphasis of Current Earnings

Recently it has been noted that Japanese firms concentrate more on longer-term profits rather than on trying to maximize current earnings per share. This is a sound concept and one the better-managed organizations in the United States (a minority of companies) also follow. That is how well-managed entities create colossal quarterly earnings increases, by spending several years on research, developing superior new products,
and cutting costs.

But don't be confused. You äs an individual Investor can afford to wait until the point in time when a Company positively proves to you its efforts have been successful and are starting to actually show real earninsrs increases.


Requiring that current quarterly earnings be up a hefty amount is just another smart way the intelligent Investor can reduce the risk of excessive mistakes in stock selection. Many corporations have mediocre management that continually produces second-rate earnings results. I call them the "entrenched maintainers." These are the companies you want to avoid until someone has the courage to change top management. Ironically, these are generally the companies that strain to pump up their current earnings a dull 8%
or 10%. True growth companies with outstanding new products do not
have to maximize current results.