The most underrated part of a company report for me isn’t the revenue figure itself, but what happened to it relative to the previous period.
Let’s say the company reported $10 billion in revenue.
That sounds impressive. But without context the number is almost useless.
If a year ago it was $8 billion, then the growth is 25%.
If a quarter ago it was $9.8 billion, then sequential growth looks much more modest already.
And if management had already built in $10.5 billion, then the same $10 billion looks completely different.
So I try to break down the report into at least three comparisons:
actual → prior year
shows how the business is trending;
actual → previous quarter
shows the current pace;
actual → expectations
shows how much the result differed from what had already been priced in.
And only after that do I look at the market’s reaction.
Because a stock can fall after an earnings beat—not because the report is bad, but because the market was expecting even more.
For me, a good number without the right comparison is just a big number.
#bStocksCIS @BinanceCIS
Let’s say the company reported $10 billion in revenue.
That sounds impressive. But without context the number is almost useless.
If a year ago it was $8 billion, then the growth is 25%.
If a quarter ago it was $9.8 billion, then sequential growth looks much more modest already.
And if management had already built in $10.5 billion, then the same $10 billion looks completely different.
So I try to break down the report into at least three comparisons:
actual → prior year
shows how the business is trending;
actual → previous quarter
shows the current pace;
actual → expectations
shows how much the result differed from what had already been priced in.
And only after that do I look at the market’s reaction.
Because a stock can fall after an earnings beat—not because the report is bad, but because the market was expecting even more.
For me, a good number without the right comparison is just a big number.
#bStocksCIS @BinanceCIS