Switch to:
Red Hat, Inc. (NYSE:RHT)
Retained Earnings
$720 Mil (As of Feb. 2014)

Retained earnings is the accumulated portion of net income that is not distributed to shareholders. Red Hat, Inc.'s retained earnings for the quarter that ended in Feb. 2014 was $720 Mil.

Red Hat, Inc.'s quarterly retained earnings increased from Aug. 2013 ($623 Mil) to Nov. 2013 ($675 Mil) and increased from Nov. 2013 ($675 Mil) to Feb. 2014 ($720 Mil).

Red Hat, Inc.'s annual retained earnings increased from Feb. 2012 ($392 Mil) to Feb. 2013 ($542 Mil) and increased from Feb. 2013 ($542 Mil) to Feb. 2014 ($720 Mil).


Definition

Retained Earnings is the accumulated portion of net income that is not distributed to shareholders. Because the net income was not distributed to shareholders, shareholders’ equity is increased by the same amount.

Of course, if a company loses, it is called retained losses, or accumulated losses.


Explanation

Historically profitable companies sometimes have negative retained earnings. This is because they have cumulatively paid out more to shareholders than they reported in profits.

For example, in 2011, Microsoft had negative retained earnings. This does not mean the company lost more money than it made over the years. It just means it paid out more money than it earned.

If a company has negative retained earnings, investors should check the 10-year financial results. They should not assume that negative retained earnings prove a company has generally lost money in the past.

Of course, many companies with negative retained earnings have indeed lost money in the past.

Retained Earnings: Warren Buffett’s Secret.

One of the most important indicators of durable competitive advantage. Net earnings can be paid out as dividends, used to buy back shares or retained for growth.

If the company loses more than it has accumulated, retained earnings is negative.

If a company isn’t adding to its retained earnings, it isn’t growing its net worth.

Rate of growth of retained earnings is good indicator whether it’s benefiting from a competitive advantage.

Microsoft is negative because it chose to buyback stock and pay dividends.

The more earnings retained, the faster it grows and increases growth rate for future earnings.


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Red Hat, Inc. Annual Data

Feb05Feb06Feb07Feb08Feb09Feb10Feb11Feb12Feb13Feb14
Retained Earnings -232-152-92-2851138245392542720

Red Hat, Inc. Quarterly Data

Nov11Feb12May12Aug12Nov12Feb13May13Aug13Nov13Feb14
Retained Earnings 356392429464499542582623675720
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK
Hide