You are a security analyst for Magneto Investments and have chosen to invest in one firm from the semiconductor manufacturing industry. You have narrowed your choice to either Owen-Foley Company or Amerton Industries, firms of similar size and direct competitors in the industry. The following information was taken from their 2017 annual reports:

REQUIRED:
On the basis of this information, explain which of the two firms seems to have the stronger earning power.

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OWEN-FOLEY COMPANY 2017 2016 BALANCE SHEET $ 18,400 $16,600 Deferred income tax INCOME STATEMENT $163,000 Income before taxes Income tax expense (52,000) $111,000 Net income Effective income tax rate: 36% AMERTON INDUSTRIES 2017 2016 BALANCE SHEET $ 18,800 $19,800 Deferred income tax INCOME STATEMENT $158,500 Income before taxes Income tax expense (53,500) $105,000 Net income Effective income tax rate: 36%