With the popularity of investing growing, the term “Make your money work for you” is becoming all the more prominent as it draws more people into the world of Wall Street. But, when more people begin to trade stocks, it also means more inexperienced investors who have no clue who to trust, which stocks to invest in, and most importantly, where to start. With information from different media companies contradicting each other about a company's validity, new investors can find it hard to really know if a stock is worth investing in or if it’s just a worn out foundation bound to collapse. Although the thought of scouring for information about a stock may seem futile, there is one source that experienced traders have used as their tried-and-true compass to see if a company is legitimate or not, and that is the earnings report.
What are Earnings Reports?
Described as the “light that shows the path through any stocks tunnel” earnings reports are “quarterly financial statements issued by publicly traded companies” as described by Forbes Investing. Although that description may sound terse, earnings reports really only do exactly what is in its name, they report the financial logistics of a company to the public. In order for a business to become a publicly-traded company meaning that outsiders can invest into it, they need to file both quarterly and annual financial statements to the Securities and Exchange Commission which is an independent agency of the federal government that’s main purpose is to enforce laws against any market manipulation. These financial statements are called 10-Q’s or earnings reports. They can show how well a company did in the past quarter of the year and can be a key factor in deciding whether to invest or not.
The Main Parts of an Earnings Report
Earnings reports are typically cut into three main parts: The press release, the presentation deck and lastly the 10-Q. The press release shares important parts of the earnings reports to the public such as the revenue, net income, dividends and earnings per share. They usually hold information from the 10-Q and touch up on the main points of anything that affected the stock. The presentation deck is the part of the report that underlines the positives of the quarterly earnings report and is usually targeted to investors to show how great and amazing their stock is and give them reasons why they should invest in it. Lastly, the 10-Q is the hard cold facts of the company's financial report. Unlike the previous two, the 10-Q delivers biased free information about how well the company did including income statements, balance statements and any risks that the company could be in later on in the future. Although it may be long and hard to read, the 10-Q offers impartial information about the company and is often thought of as the most important part of the earnings report.
How to Get to Earnings Reports
After learning about how useful earnings reports can be, any investor would be interested in learning how to use them so they can add it to their arsenal of sources for collecting information on stocks. One of the best places to get earnings reports is Yahoo! Finance which can offer you an earnings report on practically any stock on the market just by searching its name. Yahoo! Finance also provides a calendar for earnings reports that shows which companies gave their earnings reports on any specified date which could be useful if an investor was looking to jump the gun on a stock the second the earnings report comes out.
Earnings reports can show investors how well a company is doing through their three main parts: the press release, the presentation deck and the 10-Q. Without earnings reports it would be near impossible to get an accurate account for how well a company is doing and can make investing in the stock market more of a shot in the dark than it ever was before. Overall, earnings reports are a versatile tool that provides a sound way to collect data about a company's stock that any seasoned investor uses to research if a stock is onto something big or just about to tap out.
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