How to Read an Earnings Report: The Numbers That Matter

Four times a year, public companies report how they did. Stocks can jump or sink in minutes afterward. Here is what to look at.

Revenue

Revenue, or sales, is the money the company brought in. Growth here shows demand is rising. Compare it with the same quarter last year, not just the previous quarter, to avoid seasonal swings.

Earnings per share (EPS)

EPS is profit divided by the number of shares. Analysts publish estimates beforehand, and the stock often moves on whether the company beat or missed them. A beat is not always good news if investors were expecting even more.

Guidance

Guidance is what management expects for the next quarter or year. It often matters more than the quarter just reported, since stocks look forward. A great quarter with weak guidance can still send the price down.

Margins

Profit margin shows how much of each dollar of sales turns into profit. Falling margins can be a warning even when sales are rising.

Debt and cash

Check the balance sheet for cash and debt. A company with lots of debt has less room to handle a bad stretch.

Do not trade the headline

Prices often swing wildly right after a report, then settle. Reading the numbers calmly beats reacting to a red or green arrow.

Related reading

• What is a P/E ratio?
• Value vs growth stocks
• Dividend investing for beginners

This is general education, not financial advice.