Look-Through Earnings

Look-through earnings include the profits that a company pays to its shareholders in the form of dividends and the retained earnings that the company uses to expand its operations. This concept was popularized by Warren Buffet to analyze the overall earnings-generating capabilities of the firm. The idea is that all of these profits have value to investors - the dividends provide an immediate benefit, while the retained earnings should increase the stock's value in the future.




Taobiz explains Look-Through Earnings
The investor should consider all of these profits - the look-through earnings - in assessing the value of a stock. Look-through earnings also account for the taxes that would have been paid if the retained earnings had been distributed as dividends.