Understanding a company's financial performance is essential for informed investment decisions. To do so, investors need to access and analyze the company earnings report. But what is an earnings report, and what kind of information can you glean from it?
An earnings report — sometimes referred to as a financial statement or quarterly report — is a summary of a company's financial performance, including income, expenses, assets, and liabilities. It gives investors valuable insight into the company's operations, enabling them to make more informed investment decisions.
Why Does It Matter?
A company's financial performance can significantly impact its stock price. For example, if a company beats market expectations, its stock may go up in response to the news. On the other hand, if they miss estimates or report lower-than-expected earnings and revenue, the stock may take a hit.
Therefore, investors should understand the information in a company's earnings report. With that information, you can gauge how well the business performs and know whether it's worth the investment.
Accessing Earnings Reports
You have several options when accessing publicly traded companies' earnings reports. Here are some of the most common:
- The company website: Many companies make their earnings reports available on their websites, usually in the “financials” or "investor relations" section.
- Stock market websites: Stock market sites like Yahoo Finance also offer access to companies' financial performance, including income statements, balance sheets, and cash flow reports.
- Online financial aggregators: Several online financial services offer access to earnings reports, other market data, and news.
- EDGAR database: The SEC's Edgar (Electronic Data Gathering, Analysis, and Retrieval) system is the go-to source for the official documents filed by publicly traded companies.
Most companies release their earnings reports quarterly – typically after the close of each quarter: Q1 (January - March), Q2 (April - June), Q3 (July - September), and Q4 (October - December). Depending on the company, earnings reports may also be released on an annual or semi-annual basis.
What to Look For
When reading a company's earnings report, there are several key numbers to pay attention to:
- Revenue: This is the total income the company has generated in each period.
- Operating income: Operating income is the profit after paying all operating expenses, such as salaries and rent.
- Net income: The company's total profit after accounting for taxes, interest payments, and other non-operating costs.
- Earnings per share (EPS): The company's net income divided by its outstanding shares of common stock. It's a key number to consider when gauging a company's performance.
By analyzing these key numbers, you can understand how well the company is doing and make an informed decision about whether to invest. It's essential that investors understand how to access and interpret the information in a company's earnings report so they can build a sound, successful investment strategy.
Now that you have the basics of understanding an earnings report, you're well on your way to becoming an informed investor. You can also engage a financial advisor for more detailed advice and assistance.