What it is:
How it works/Example:
Earnings estimates are created by analysts who work for investment research companies.
The analyst will research a company's operations, evaluate management's guidance, study the company's operations, and also take into account macroeconomic factors, among other items.
Then the analyst will use this information to make an estimate of the amount the company will earn per share over the next quarter or year.
Why it matters:
Earnings estimates are an important predictor of the future growth of a company and thus a useful tool for both current and potential investors when deciding whether to buy or sell stock.