Reading Quarterly Results


One of the most frequent query that we receive in our mails and in our Facebook Groups from investors is about the quarterly results of the stocks they are holding. So, we thought of writing a post on it and now as you are reading this post you will be able to decode the quarterly results of the stocks you hold yourself, yes that's gonna happen now just keep reading.

Examining the quarterly results is a great way of analysing the performance of companies. As per the guidelines of market watchdog, Securities and Exchange Board of India (SEBI), its compulsory for every listed company to produce quarterly results.

Most of us do look for the results but don't move beyond net profit figures. From investment point of view, zeroing of net profit may not give us the right picture as there are many deductions like depreciation, tax, amortization etc. which may 'artificially' reduce earnings leaving nothing on table.

Although its not easy to analyze quarterly number like a professionals would do, but we as a lay person can surely move beyond net profit figure and gauge what's happening in our company. Apart from net profit we need to analyze sales, EPS, operating income, expenditure etc. Let's take on these terms one by one.

Sales: Sales is the amount of goods/services sold by a company in a given period of time. It's also known as the 'top line' or revenue. A consistent increase in the top line shows strong growth in business. This is one of the essential criteria that we look for while coming up picks on our blog.

However, the quality of top line needs to be examined as items like sale of fixed assets can increase the top line but the same shouldn't be confused for strong growth. We can verify it by examining the balance sheet where fixed assets will be showing a reducing pattern.

Operating Expenses: These are the expenses that arise in the course of running a business. It consists of item such as salaries, wages, R&D costs, office supplies, electricity, lagal fees etc.

Operating Profit: On deducting operating expenses from net sales we get the operating profit or earnings before interest, tax, depriciation and amortisation, normally referred as EBITDA. Operating profitability shows how efficiently a business being handled by its management.

Net Profits: Net profits are popularly known as the 'bottom line' shows the net earnings or losses of the company. It is obtained by subtracting tax, interest payments etc from operating profits.

Earning per Share (EPS): EPS is calculated by dividing the net profit by number of outstandint shares. Rising EPS is a good sign of while a fall in EPS is not considered good.

Interest Cost: It is the amount paid by company on loans taken by it. Rising interest costs shows that company has increased its debt. However, proper deployment of debt is also essential along with rise in sales and profit otherwise rising interest will eat up the profitability of a company.

A single set of numbers can't tell us much. So, we need to compare it with the numbers of previous quarter to know where the company is heading. There are two methods of comparison of quarterly performance i.e. quarter-on-quarter (QoQ) or year-on-year (YoY).

QoQ is the one in case of which we compare the results with that of previous quarter. Like results of June 2015 are compared with the results of March 2015. In YoY comparison we compare the results of a quarter with the results of same quarter in previous year, like we will be comparing the results of June 2015 with June 2014. Sectors which are prone to seasonal fluctuations like FMCG, cement, retail, auto etc. should be compared on a YoY basis. On the other hand growth in sectors like telecom, technology should be compared on QoQ basis.

Impact of results on price of stock 

Whether a stock will rise after good results or fall after a bad results depends entirely on the anticipation of investors. In some cases price may even fall after good results while in other cases it may remain unaffected even after bad results.

At times, long-term investors take advantage of short-term fall coming after a bad quarter. However, if long-term outlook is bad for a company, then both short and long term investors should avoid investment in that company.

Trading on Results

So, the big question is should you buy or sell based on quarterly results? I would advise No, unless and until you are sure about where the company is heading you shouldn't base your decisions entirely on quarterly results. However, if the results are bad you can use that opportunity to add fresh longs if you are confident on the long term growth of the company. Buying and selling decisions should be based on fundamental and technical analysis. One good quarter doesn't means all is well and similarly a bad one doesn't means end of story

Important Links

Result Calendar BSE

Basic Fundamental Analysis For Dummies

Introduction to Charting



Happy Investing
The Multiplier








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16 comments

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August 9, 2015 at 8:00 PM delete

Your commitment to excellence has inspiring entire group. Thank you Abhishek.

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Raj Patel
AUTHOR
August 9, 2015 at 8:41 PM delete

Superb...much awaited frm u..

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SauriN PateL
AUTHOR
August 9, 2015 at 9:27 PM delete

Can I buy dynamic products for 2-3 months

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Anonymous
AUTHOR
August 9, 2015 at 10:02 PM delete

Thanks sir

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August 9, 2015 at 10:23 PM delete

u can buddy fan principle is suggesting a breakout soon................... also we are expecting good results this time

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August 9, 2015 at 10:23 PM delete

keep learning keep earning............

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August 9, 2015 at 10:24 PM delete

keep learning keep earning............

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SauriN PateL
AUTHOR
August 12, 2015 at 5:26 PM delete

Hello sir,
Now in bearish market no one give tips.everyone gone hide..
Please advise is this temp correction and we get that price again? ?
Or its gon and high price is now only in dream??? My portfolio down 10% only in two days... worried plz help wt to do

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August 12, 2015 at 6:27 PM delete

just hold on its market and gonna work like this few days back people were worried about greece that went away and our picks doubled and now they are worried about gst that too will get passed sooner or later..................... so buy good stocks and let them take their time to perform don't check daily prices........................... regards and i will b there n won't hide anyhow :) :)

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SauriN PateL
AUTHOR
August 12, 2015 at 9:39 PM delete

Thank you so much..
And sorry bt m not talking about you sir..

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Simran Shah
AUTHOR
August 13, 2015 at 1:13 PM delete

An outstanding ѕhare! I have just forwarded this onto a friend who had been doing a little reseaгch on this. thanx for spending the time to discuss this subject here on your web page. Get Stock Market Tips & Perfect tips in Stocks, Intraday tips in NSE and BSE.

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SauriN PateL
AUTHOR
August 13, 2015 at 2:41 PM delete

What about pennar ind & subex??
My buy price is 65 & 15.50
Heavy loss..plz advice. .

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August 13, 2015 at 7:21 PM delete

hold both for now.....................regards

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Arup Ghosh
AUTHOR
September 30, 2015 at 3:20 PM delete

Cool Abhishek ,.,. I have diligently gone through, made notes .. the last bit where you mention about YoY vis-a-vis QoQ application was nice ..

How do you identify a scrip for potential investment .. DO you just randomly scan all the companies and filter though the checks that you have ?to see if it stands tall on all checks_n_measures >

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September 30, 2015 at 4:33 PM delete

randomly scanning all scripts is not possible for retail investors there is a very good site named screener dot in u can go it and scan stocks based on fundametnal parameters............... checkk it out

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