Every investor needs to know how to read an earnings report. However, this can be a difficult task with companies using tricks to hide negative earnings. The terms used can also be hard to understand, especially if an investor does not understand finance. Despite it being challenging, it is not impossible to learn.
With patience, discipline and the proper guidance, you can start to analyze earnings reports by yourself. That is where we come in. We provide the latest analysis on notable earnings to make it easy to understand how the stock market works. We also update you on the stock earnings calendar. Our articles do not just help beginners out. We are a credible source for experienced analysts or investors looking to stay updated on the latest stock market news.
Why you should learn to read an earnings report
Reading an earnings report is an essential skill if you want to stay updated on a company’s performance. It can help you decide if you’re going to stay with a company as a shareholder or sell your stock. It can also give you an idea of what your shares are worth since it tells you the earnings per share (EPS). While the task may seem strenuous, it is not as hard as it looks.
What an earnings report entails
The first thing to focus on in the earnings report would be revenues, which is the total amount of money the company made quarterly. Next, you need to read the costs, which is the money the company spent.
An earnings report also gives you the company’s quarterly earnings. The quarterly earnings are the profits the company makes after they deduct costs. Companies could also refer to it as the bottom line or net income. A company with a continuous stream of profits is one you want to put your money into.
For an investor, the EPS is the most crucial part of a report. Analysts calculate it by dividing the earnings left for investors by the total number of shares. If a company’s EPS remains steadily high, it is an indication that you made a suitable investment.
Before a company releases its earnings report, analysts work out an estimate. The estimates vary with different analysts and might not always be accurate, so it is essential not to decide based on estimates alone. Despite this, estimates still has a significant impact on the stock price. Companies that beat their estimates tend to increase the value of their shares as investors take it as a good sign. However, companies that meet or don’t reach their estimates can have investors selling out, thus lowering the value of their shares.
Some companies choose to issue guidance in their reports. The guidance contains information on the company’s last quarter and predictions of the coming quarter. This guidance also affects stock prices. If the guidance is low, many investors pull out, and if it is high, more investors come in.
Keep in mind that one negative earnings report is not a reason to sell out. What matters is the long-term performance of a company. A company that shows a steady rise in profits is profitable even when the revenue is initially low.
Reading reports from analysts not associated with the company is also vital as a company might employ a few tricks to hide bad results. These analysts give you an idea of how the company is performing.
Follow us for reliable and expertly analyzed news on notable earnings. We also give you updates on any adjustments or additions to the stock earnings calendar to help you navigate your way through the stock market.
