This post is divided into 3 sections:
- Impact of QR
- Components of QR (which investors should look before they invest)
- A short overview on Facebook 4th QR.
(QR – Quater Results)
If you are an existing shareholder or are going to invest in the company then you must be highly urged to know what’s happening in the company time to time and how it has been performing.
One of the ways to find out is to look at the quarterly numbers published by companies.
As per the SEBI regulation, it is compulsory to publish quarterly results for all listed company.
Quarter results have a great impact on stock price.
- A single positive hike in the sales can increase the share price to rocket high.
- It also acts in negative performance.
Like a news on HDFC bank, positive quarterly results made the stock green.
Like a negative news on Microsoft made the share red:-
However, stock market news are full of quarter results. By this, you can understand the importance of quarter results and its impact on stock price.
Below are some news which may give a tinge of glimpse :-
You can find more day to day news on quarter results on any finance news site or app.
Below are some basic components (defined by business today) that investors should seek out:-
- Gross Sales: Gross sales are also called as the ‘top line’ or revenue or total sales.
- Net Sales: From gross sales, you can derive net sales by deducting sales return, sales allowances, and sales discount from gross sales.
- Operating expenses: These are expenses that arise during the course of running a business. Operating expense consists of items such as salaries paid to employees, research and development costs, legal fees, accountant fees, bank charges, office supplies, electricity bills, business licenses.
- Operating Profit: When operating expenses are deducted from net sales you get the operating profit, or earnings before interest, tax, depreciation and amortization (EBITDA).
- Net Profit or net income: In the income statement you can find details about tax and loan repayment which when deducted from operating profits gives you the net profit.
- Earning Per Share (EPS): It is the amount of earnings per outstanding share of a company. Outstanding share refers to those shares which are trading in the market. EPS is arrived at by dividing net profit by numbers of share outstanding.
- Interest Cost: It is the cumulative sum of the interest paid on loans by the company. “Rising interest cost depicts that the company has increased its debt.
This is some key areas in quarter results. Decline in Operating expenses and interest cost shows a good sign whereas opposite rule applies to the rest.
“Cause and effect” of “Quarter Results” of Facebook.
Facebook share gone trendy due to 4th quarter results.
- Facebook sales increase by 123%.
- Facebook net profit surges by 52%.
- Facebook share surged by 13%.
- Facebook CEO become the 6th richest man. His wealth grown by 6 billion.
That’s how quarter results affect the stock market.
You can also have a look at quarter results (in some key affecting areas) described in section 2nd of this answer.
It all about “expectations”
It is a wrong sentiment that profit means price hike and loss leads to drop.
It’s not a thumb rule.
Market run on expectations instead of present fundamentals.
No price in the market reflects the perfect value of the fundamentals of the company.
X company reported 100 as a profit last year but this year people are expecting 60 as a result of the company.
Now as per the expectations, the market will value the stock according to 60. The change in the price will not immediately get reflected, it may take weeks, months and even years for the market to get that stock at the price which equates to the expectations.
So the price before the results announcements will be the price which reflects the company which will report 60 as a profit (lesser than its last year profit).
Hold on! What if the company reported a profit of 80?
You might simply say – It’s less than last year profit so the price will go down.
But here is where you went wrong.
The price before the announcement reflect the value which equals to the company which will earn 60 but it earned more than that.
SO the price will absolutely increase.
What is market expectations?
It’s the overall sentiments of retail investors, brokers call, big investors bets etc altogether develop market expectations.
In simple words – Stock price is the end product of push & pull of market expectations (click to tweet).