The moment you invest in Contract for Differences (CFD) online, you would need to familiarize yourself with the concept of quarterly earnings report. On a periodic basis these reports are released and provide valuable information to the investors. Even for all those who are into fundamental analysis? The mention of the term reports could bring about a sense of jittery but many investors eagerly wait about earnings calendar. Not forgetting to mention other useful data which contributes to their decision making process. Let us focus our attention to quarterly reports and their importance.
Quarterly earnings report along with their importance
Before getting to the point why online traders rely on quarterly earnings report, let us analyse what they are in the first place. Every public company has to report its performance in each quarter. This replicates official fillings on how the company has performed in the previous year. Some of the information that is revealed by quarterly reports is;
- Earnings expected per share
- Net sales and income
- Earnings you expect from operations
For online share traders these reports really appear to be important. If interpreted correctly this would help a trader evaluate the financial strength along with stability of a company and this information can be put to use when you are incorporating trading decisions. This would give you an idea on whether to invest in a particular stock or go on to sell it.
Even for the online traders these reports are not even on their own. They go on to point to important facets about market volatility. A report that falls short on the expected lines can have an impact on the price and for alert traders exciting opportunities can be provided. A trader can benefit from a quarterly report in the following ways;
- It gives an idea about the financial strength of a company
- They can figure out whether a share is oversold or even over brought
- With the above information at their fingertips they can take suitable trading decisions
- Quiet often volatility surrounds the reports which can be taken advantage of.
More about quarterly earnings guidance?
The term guidance might seem to be a bit misleading. These reports are not meant to provide guidance on traders on how to trade, but reveal projections. How company estimates would have an impact on the business, work on the existing market conditions and how internal and external environment can have an impact on the business. Guidance would also include inputs on revenue projections, capital spending and earnings. Some companies go on to show projections about their inventory and cash flows.
It is not mandatory for a company to release earnings guidance, but they do. No fixed time frame can be set in terms of release dates but companies undertake it with the quarterly reports. The reports are really useful especially when it comes to the aspect of dealing with future earnings. If there does exist a difference between a company expects and investors predict, it is reflected in the shares. This could move in the positive or negative direction.
The point here is that you need to take guidance with a pinch of salt. This is a mere estimation that is modelled on the existing set of market conditions. For sure no one would be aware what the future holds and this works out to be a mere guidance for the future investors. It is a mere assessment and cannot be confused with facts.
Now the question is do positive results always contribute to an increase in the value of shares or a negative result can lead to a drop in shares value. This does not work in that manner always as the system proves to be a bit complex.
To conclude give due consideration to the fact that a market is subjective. It deals with decision making at a subjective level along with market psychology. Going through the same quarterly report people can arrive at different conclusions. By observing the same report they act in a different manner. For an online trader the quarterly report may open up new sources of information. But as an individual the onus is on you to interpret the result and take remedial actions.