Beware of Perfect Earnings

This weekend I ran across a very interesting article by Eric Miller at The downfall of AIG reminded Miller of a past article that discusses “the beautiful line”. The beautiful line occurs when a company generates smooth, consistent earnings over long periods of time.

It is extremely difficult to generate incredibly consistent earnings over a long period of time. Miller lists several reasons why this is. Since I’m often looking for companies with smooth and predictable earnings, this article was a bit of a wake up call to me. I need to remember that earnings that seem too perfect to be believable maybe should not be believed.

Random Gleanings: The Beautiful Line

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