using numbers from the last financial year will lead to
undervaluing them. Even for those firms that are not are
changing substantially from quarter to quarter, updated
informationmightgiveusachancetocapturethesechanges.
There are several financial markets where firms still file
financialreportsonlyonceayear,thusdenyingustheoption
of using quarterly updates. When valuing firms in these
markets,analystsmayhavetodrawonunofficialsourcesto
update their valuations.
ILLUSTRATION 3.1: Updated Earnings for Google:
September 2005
Google followed its publicized initial public offering in
September 2004 byreleasinganannualreportfor2004.Inthe
firsttwoquartersof2005,Googlereportedhugeincreasesin
revenues and operating income. To compute the trailing
12-monthvalues, weused thenumbers in themost recent
10-Kand themostrecent quarterlystatement (endingJune
2005) in the following table:
Trailing12-month=Annual December 2004 +Sixmonths
June 2005 SixmonthsJune 2004 (the 2004 sixmonthdatawill
be in the 2005 10-Q).