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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17 comments

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SauriN PateL
AUTHOR
October 27, 2015 at 8:59 PM delete

Now your callon kpr mill??

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Vinod
AUTHOR
October 28, 2015 at 11:03 AM delete

ur views on VTM ltd

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Revathi M
AUTHOR
October 28, 2015 at 12:20 PM delete

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Vinod
AUTHOR
October 28, 2015 at 2:40 PM delete

sir, ur comments on VTM ltd

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October 29, 2015 at 12:17 AM delete

KPR Mill is already our old pick buddy at 348 levels we are in more than 125% gains right now and the stock still seems to be in strong uptrend so u can buy and ride it. Happy investing

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October 29, 2015 at 12:21 AM delete

HI vinod ji although fundamentally vtm looks fine but chart structure is bit abrupt................ its at same levels since past several years no action here consider adding it only if it comes around 19-20 levels or simply avoid it for now right now its near its trendline resistance so expected to correct downwards on upside 29 should b strong resitance for it..........

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Anonymous
AUTHOR
October 29, 2015 at 11:44 AM delete

what is meaning of finance cost
walia

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vivekanand
AUTHOR
October 29, 2015 at 3:23 PM delete

sir.. what is ur view on gujarat themis biosyn? i purchased at Rs. 64

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October 30, 2015 at 12:16 AM delete

As per Google The Financing Cost (FC), also known as the Cost of Finances (COF), is the cost and interest and other charges involved in the borrowing of money to build or purchase assets. The total expenses associated with securing finance for a project or business arrangement.. Thanks

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October 30, 2015 at 12:17 AM delete

good stock right now small downside possible but overall a good pick u can consider buying more on dips p.s my view is technicaly............

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Vinod
AUTHOR
October 30, 2015 at 10:59 AM delete

Good morning Abhishek ji
i am holding waterbase purchased @ 105 level for long term
and i believe it have lot of potential to grow more . but after hitting 170 level now it comes down to 130
my qstn is can i accumulate more at these level or waiting for some more dips?
Also ur valuable tech. and fund. analysis of this stock is also expected sir

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October 31, 2015 at 5:25 PM delete

yes waterbase is a good stock you can accumulate it in parts for long term also our old pick suggested at 62 levels...............

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vivekanand
AUTHOR
November 2, 2015 at 9:58 PM delete

hi sir.. u were bang on with ur prediction that there is a possibility of downside.. congratulations.. now what target can we expect in what time frame.. thanks for ur advice.. (PS: I am holding shares at Rs.64.. CMP: 56)

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vivekanand
AUTHOR
November 3, 2015 at 6:55 PM delete

u were bang on with the prediction of small correction.. now what should be the target that I should be looking at? Thanks a lot.. because of ur timely advice i din not panic when it went down though my purchase price was 64

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November 3, 2015 at 7:10 PM delete

vivekanand ji u can hold on gujarat themis u can expect levels of 80+ in next 1-2 months again my view is technical not tracking the stock fundamentally............. thanks

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May 25, 2016 at 8:53 AM delete

I purchased bajfinance at 6400level shall I hold or sell

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May 25, 2016 at 9:34 PM delete

good stock for long term you can hold it . Cheers

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