The latest installment
of Ken & Company underscores what a few pennies of quarterly earnings was worth to shareholders way back in 2000. At a price/earnings multiple of 70 (Enron's peak around the time in question), failing to beat a consensus estimate by three cents would have knocked exactly $2.10 off the share price. But that isn’t much considering Enron was trading around $90.
Of course, the math fails to take into account the psychological effect of failing to beat expectations. Even so, it’s a long way from $87.90 to zero. I’d say it’s time to start focusing on what Ken and Jeff had to say about financial items other than earnings.
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