The market of shares and stock offer a number of options for those who love to get additional income with limited risk and in a definite time frame. Well, for such traders the terminology of the market is much required to be understood as they make a good difference when it comes to trading daily in any of the segment of the market. The term earnings calendar refers to the time-frame according to which the publicly trading companies announce their earnings within a time frame such as a quarter or a year.
The earnings calendar arranges these announcements based on the company and date. These earning reports then help investors to choose the stocks based on their risk appetite. While the laws are exempt for private companies, it is mandatory for public trading companies to issue their earnings reports at the end of each quarter as well as at the end of the fiscal year.
Stocks and private company
The private companies undergo great pressure and stress (in terms of financials) and hence raise vast amounts of money to establish their business. This statement though not true for all but is a ground reality for most of the startups. They raise money to a certain point after which they become financially independent. The stocks come to the picture only when the companies go for an IPO (Initial Public Offering) and hence the shares cannot be traded until and unless they become a public limited company.
The earnings reports are meant to be public records, intended to keep investors aware of the financial developments of a company. The reports might sound insignificant but move the markets up and down and may lead to the rise or even death of the company. Various stock analysts make predictions on the financial status of the company based on the expectations of the market.
For a simple example, the stocks of a company will go up, if the results of the company are at the part of the market expectations. In another example, let us say that the reports of a quarter come out to be negative, but it beat the analysts’ expectation and performed better than the expected loss. Such a scenario can make the stocks go skyrocket while bringing positive enthusiasm in the market.
Analysis of a quarterly report
Principally the stock reports contain three parts – income sheet, balance sheet, and cash-flow statement. Some of the things that an investor looks for while the earnings are out are:
- Gross sales:
Gross sales give the entire revenue generated by the company (excluding the expenses).
- Net sales:
Gross sales minus the total expenses that a company incurs give us net sales.
- Operating Profit:
Operating profit also-known-as earnings before interest tax depreciation and amortization are generally net sales minus operating expenses.
- Earnings per share:
It is the dividend that an individual gets after all the expenses are deducted and are calculated by dividing net profit by some outstanding share.
- Interest cost:
Interest cost is the interest paid on loans by the company.
Quarterly reports and emotions
While it is evident that the quarterly earnings reports invoke all sorts of emotions in the market, stocks that have been hit hard due to poor results still growing strong. The downfalls in stock prices are temporary, and the stocks return to their normal prices within a month. Just because the company had some poor results, it doesn’t mean that the company is not a good investment anymore.
According to experts in the market who offer their guidance to the traders it is more important to see growth in the profits and revenues of a company are growing or not while it is similarly more important to see if revenues are growing at the cost of margins. If the answers for the same are positive, then it is a warning sign for the investors.
Summarising it all, we can conclude that the investments are a lifelong process, with markets behaving on short term goals instead of looking at the bigger picture. While a stock may dive deep due to a quarterly result, but in the end, if a company is building and working on long term goals, the investors will the first to cut the cake.