Must Know Things To Look For In Company Results

  Author: Kundan Kishore

At the end of every quarter, companies listed on stock exchanges, declare their financial results. This disclosure of financial information helps investors to know how the stocks that they have invested in are faring. But in a sea of numbers of what should an investor be fishing for to get an accurate picture of his or her stocks investments? Here are some must know things.

Sales, expenses and profits Look for trends in company’s sales, expenses and how much money it made in the quarter, expressed by the term net profits (see video: Impact of net profit margin on stock prices decoded).

Net profit and EPS The net profit, divided by number of shares of company commonly called EPS or earning per share. This is the most important figure an investor should look for in quarterly financial statements. This figure should not only be viewed as a standalone figure, but the investors should also compare EPS growth over previous quarters and years (see video: What every investor must know about EPS).

While examining EPS, ensure that there is no extraordinary income or one-time profit that has boosted the figure. Details of extraordinary income or loss are provided in notes below the income statement.

Other indicators Investors should look at not only the net profits figures, but also for other details like sales growth and interest cost. For instance, rising interest cost indicates that the company has increased its debt. This can be a dangerous sign particularly if rise in interest cost is more that the profit growth of the company.

Management effectiveness Investors also need to look for trends in the effectiveness of the company’s management to manage its business.

Dealing with disappointing numbers What should you do if the quarterly results of a company in which you are invested is invested? Bad quarterly results often lead to steep fall in stock prices. However, it may be a temporary phenomena, and thus, you shouldn’t react immediately before determining the decline as a long term trend. Remember, companies may get affected shocks in the industry and economy. Good companies typically tide over them in the course of time.

Suggested videos:

How company earnings record affects stock prices

How to decode company earnings outlook for stocks investments