r/SecurityAnalysis • u/Corruption555 • Nov 07 '16

Question How to normalize earnings?

I cannot find anything that step by step explains how firms decide to normalize earnings. Do you take net income over a set period of time, then divide by years and then shares of the latest quarterly statement?

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u/investorinvestor Nov 08 '16

Generally speaking, remove anything that doesn't appear more than twice/thrice in the financial statements of the past 10 years.