Quarterly Earnings Report Time: How Did They Do?

The quarterly earnings report is a very important document that most investors will want to be aware of. This is a document that is released by a corporation in order to give a summary of the business dealings of the previous three months. Here are the basics of the quarterly earnings report and how you can use it as an investor.

Quarterly Earnings Report

The quarterly earnings report is a document that a company has to file with the SEC. Most of the time, investors are only aware of the press releases that companies create around the time of the quarterly earnings report. However, if you want to get the important information, you will need to read the full report from the SEC. The full quarterly earnings report contains three vital pieces of financial information. It includes a balance sheet, an income statement, and a statement of cash flows. As an investor, you can take away a lot of information from these reports.

Sales Growth

When you get your hands on a copy of the quarterly earnings report, you will want to make sure that you check the sales growth for the previous quarter. One of the most important aspects of a successful business is sales growth. You want to make sure that the figures for the sales growth are close to what they should be. If you see a large decline in sales growth, this should be concerning to you as an investor. When a company has significant trouble selling their product, this could be a sign of bigger problems to come. If this trend continues, it is only a matter of time before the company will go out of business. Therefore, if you notice a big decrease in sales, you should start to be very cautious as an investor.

Profit Margins

Something else that you will want to evaluate when looking at the quarterly earnings report is the profit margin of the company. This can tell you a general direction that the company is headed. By taking the operating income and dividing that by the net sales, you should be able to get a percentage that represents profit margin. When you get this percentage, compare it to the same percentage from the same quarter in the previous year. If the profit margin is increasing, this can tell you that the company is becoming more efficient and doing a better job. However, if the profit margin is decreasing significantly, this can tell you that the company is experiencing internal problems.

Investment Considerations

When looking at a quarterly earnings report, it can seem a bit overwhelming at times. There is a lot of financial information included in this report. However, if you slowly look over the basics of the report, you can sometimes get a good idea of the safety of your investment. By looking out for negative signs like decreasing profit margins and decreases in sales, you can sometimes avoid a big loss.

blog comments powered by Disqus
Scottrade