Definition:
Companies like to “smooth” their earnings, maintaining steady and predictable growth so that investors on Wall Street aren’t caught by surprise by a sudden spike either positive or negative.
Book Excerpt:
(Excerpts from Financial Intelligence, Chapter 11 – Assets)
You might think that Wall Street would like a big spike in a company’s profits – more money for shareholders, right? But if the spike is unforeseen and unexplained – and especially if it catches Wall Street by surprise – investors are likely to react negatively, taking it as a sign that management isn’t in control of the business.
