# Formula

Could someone please help me with a formula that will tell me the percentage of growth when the company reports earnings from -.09 to .07. I can’t seem to handle the negative number.

Thanks so much to everyone contributing to this board. Because of what I learned here, I will not be jumping off the bridge with this downturn we are having.

Jim

Could someone please help me with a formula that will tell me the percentage of growth when the company reports earnings from -.09 to .07. I can’t seem to handle the negative number.

Hi Jim, when you are working with movements from small negative to small positive numbers, or with small numbers period, per cent growth is meaningless. You need to use amount of growth (in the case you gave, 16 cents). You can forecast, for instance, that if the company increases their net by the same amount next year, they will make about 16 cents more (or 23 cents of earnings) next year. If they are growing revenue faster than expenses and you think margins are increasing, maybe a little more than 23 cents earnings. Maybe as much as 28 to 30 cents if they are really growing fast. If the number of shares is increasing, maybe a penny or two or three off that last number.

For another example, if the company made 1 cent last year and 4 cents this year, it doesn’t make much sense to say earnings were growing by 300%. They were only growing by 3 cents! And unless the growth picks up they will only make 7 cents next year.

That’s why percents don’t make sense around zero.

Hope that helps,

Saul

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The case is different depending on your goal. If you just want the answer for one company, take the negative number’s distance from 0 (positive number) and add it to the positive number. (Use the absolute value of the difference.)

If you’re trying to write a formula for any case that comes along (as in a spreadsheet template) you have to define each case separately, according to the sign of each.

For example, you must sift the instance into one of the following categories, where the older value is A and the current or newer is B:

A neg, B neg
A pos, B neg
A neg, B pos
A pos, B pos (the usual ‘normal’ case)

When you do this, you find that your math for each case is unique (maybe 2 are the same, I can’t remember.)

I have the formula somewhere, I’ll see if I can find it. Since I’m not a math wiz, it took me hours to write it. Now I can’t remember what it was for.

Dan

Hi Jim, I didn’t find the formula but I remember the exercise.
Turns out that it depends on the sign of the older number (A) only.

If A <0, Growth = negative of (B/A-1) [format as %]

If A = 0, [Growth can’t be computed]

If A > 0, Growth = B/A-1 [format as %]

In all cases, regardless of sign of B, or B=0

Excel formula for Growth or % Change
(don’t miss the minus sign)

=if(ValA<0,-(ValB/BalA-1),ValB/ValA-1)

Dan

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Thank you Saul for giving me a simple common sense explanation. You have a great understanding and are able to communicate so well.

Thank you Dan for the formula. It worked fine with just a small tweak.

And grateful to all for the continuous education.

Jim

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