What Are Company Earnings
Earnings can be defined as the net income/profit produced by the company after-tax and other expenses. Company earnings is one of the most important factor for analyst when they are analyzing a company. The future growth of the company is estimated based on its current earnings. Most savvy investors keep a close watch on the company earnings before trading in it. This is because company earnings will determine how the share prices will unfold in the near future.
What is Earnings Report
Companies provide their financial information to their investors to report their performance on a quarterly basis. This is nothing but an earnings report. Earnings report carries information like net income, earnings per share (EPS), earnings from continuing operations and net sales. Most companies file in January, April, July and October. It is through these reports that companies let shareholders know how well they have performed over the past time period. Investors compare current data with previous years’ data to estimate financial heath of the company and decide whether they would invest furthur in the company or not.
What Makes Price Surge Or Drop
A company’s quarterly and annual earnings are typically compared to analyst estimates and guidance provided by the business itself. In most situations, when earnings do not meet either of those estimates, the company stock price will tend to drop. On the other hand, when actual earnings beat estimates by a significant amount, the share price will likely surge.
Why Is EPS Also Important
Company earnings will be pointless if the growth is generated not from sales but new share capital issued for cash. This is could raise red flags. It could be due to bad sale/management team or weak product. Therefore to determine profits more accurately, investors should closely examine changes in earnings per share (EPS) and diluted earnings per share. By taking into consideration the size of a company’s increased capital base, changes in EPS provide a far better view of a company’s fundamentals and changing fortunes.
Most Volatile S&P 500 Stocks On Earnings Report Day
With the basic knowledge of earnings, i have listed below 24 most volatile S&P 500 stocks on earnings report days. They are calculated by taking the average absolute percent change of each stock in the S&P 500 on each of their earnings report days going back to the start of the bull market. Any investor planning to invest in the following stocks, should weigh their risks and rewards before jumping in.
Example On % Change On Report Day
Whole Food Markets WFMI tops the list with 12.65% volatility. So if Mr X bought 100 stocks of Whole Food Markets at the price of $45.07 = $4507 on earnings report day, his investment could surge to $5077 or drop to $3937 due to volatility. Therefore Mr X should understand the risks he will have to take to achieve the rewards.
Conclusion: Investing in highly volatile stocks during earnings report can play either way. Investors could end up winning or losing alot of money overnight. Now that sounds like gambling to me. As attractive as it might sound, play with caution. Investors starting their journey in the stock market should either invest a very small amount or keep away from them. Nonetheless, mark your calendar with the listed earnings report dates and monitor their volatility.
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