Which Top 4 E-Book Stock Has the Strongest Earnings Trends?

March 04, 2013

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Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

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Here’s your Cheat Sheet to how the top 4 eBook stocks rank via earnings trends:

Barnes & Noble, Inc. (NYSE:BKS): Current Price $15.63

Fiscal Year	2008	2009	2010	2011	2012
Revenue ($) in millions	5,122	5,122	5,808	6,999	7,129
Diluted EPS ($)	1.29	1.32	0.63	-1.31	-1.41

Sales moved up sharply in 2011 and 2012, but obviously Barnes & Noble is looking for volume growth, not profitability, as EPS turned highly negative.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter	Jan. 31, 2012	Apr. 30, 2012	Jul. 31, 2012	Oct. 31, 2012	Jan. 31, 2013
Revenue ($) in millions	2,439	1,380	1,454	1,885	2,224
Diluted EPS ($)	0.71	-0.96	-0.78	-0.04	-0.18

The losses per share over the last four quarters mean that we must reject this company from the analysis…

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