As we enter the beginning of the 3rd quarter earning report season, there become many great opportunities to make some fast cash, invest long-term, or just re-enforce your standings in a stock. I have compiled a couple of things that I look at before and after a company’s report.
Before Actual Numbers are Announced
- Create a list: Before each season begins I go through the stocks that I have money already invested in and see when they will be reporting. After that I will look at CNBC’s Earning Calender to see when other companies will report. The calender also gives you quick insight to what analyst are forecasting.
- Pre-analyze stocks: Once my list is complete, I will see what different analysts are predicting for my stocks. Granted these numbers may not always be right, but when actual earnings are reported many investors put heavy comparisons between the estimates and actual figures. Through this process, I will check out many different finance sites for all the news I can find. A list can be found here: Stock up on Tools. I always compare the numbers to how they were the previous quarter and a year ago. If it seems like growth has happened, then it is usually gets a check on my list.
It is important to do your homework and be prepared to invest a day or two before the announcements because lot of times the most gains or even losses happen during after hours, and you basically can’t do anything about it till the market re-opens the next day. By this time, it might be too late, and you might of missed the run or even lost money.
After Actual Numbers are Reported
Once the company reports its actual earnings and figures, investors usually approach a stock in two different ways:
- Take your money and run: Investors will invest in the stock when they know the company just came off a good quarter. Once the numbers are announced the stock will usually rise. Many of the holders will take their quick profit, and begin investing elsewhere. This method will cause people to invest in stocks they normally wouldn’t touch. So it is important to not be to greedy otherwise you might end up losing money.
- Stay for awhile: If you plan to stay in a stock long-term it is important to assess what the company has reported. For long-term holds, I like to see what the growth of the company is and what they forecast for the future. If they say something like they expect prices to fluctuate. You might want to stay away. I also like to stay away if numbers are down from a year ago. It is also good to carefully read a copy of the report. Sometimes if you just listen to the call, the speaker will try to sugarcoat the bad data.
No doubt, being able to carefully organize and prepare your information can help you make some fast cash every earning season. If you are unsure, then make a practice list and watch what companies and their stock price do this season, so maybe you will be ready when quarter 4 earning season comes around.
Do you have any other things you look at when evaluating earning reports?