Value investing is a concept of buying and selling stocks based on business fundamentals and not as a reaction to news or market trends. It is a well accepted principle that often the market overreacts to news causing stocks to plummet in price or escalate in value. Value investors ignore this and use sound business fundamentals to trade stock. Much of historical wealth accumulation is based in value investments. There are no short-cuts or sudden actions taken by value investors. All decisions are derived by business analytics and trend lines.
Current earnings refers to the profits from the current accounting cycle. For most small businesses, this means the earnings in the current calendar year. At the end of the accounting cycle, these earnings are rolled up into retained earnings.
A ‘Capital Account’ is a term used in partnership and in limited liability company business formats. It refers to the individual balances in the equity section of the balance sheet. The basic formula for value is beginning balance plus contributed capital plus earnings from the current accounting period less any withdrawals
The equity section of the balance sheet equals assets minus liabilities. Traditionally the equity section is referred to as the net worth of the company. If you were to dispose of all the assets through a sale and pay off liabilities, the money left over would be available for distribution to the shareholders. The shareholders basically own the equity section of the balance sheet.