9 Important Things to Consider in Quarterly Results Before Investing in Stocks

It’s that time of year again: reporting time for quarterly results! Yes! Listed Indian firms are required to submit their quarterly results to the stock market on a quarterly basis for the four quarters that conclude in June, September, December, and March.

This requirement applies to each of the four quarters. The yearly results of the corporation will be included in the results for the month of March.

The quarterly results of a firm are becoming more significant in this age of rapid change since they are used to analyse the company’s continuous success. These days, corporations report their quarterly results and provide projections for the next several quarters.

This information is crucial for the analysts who work in the stock market since it provides them with critical knowledge.

If you are an investor in the stock market who likes to do your own analysis of firms, you may find that questions such as “how to analyse quarterly results” and “how to interpret the quarterly results of a company” come up often.

In light of this, let’s talk about nine topics that you should keep an eye out for in these quarterly results in today’s blog:

Profits from Operations

When analysing the results for the quarter, we need to pay attention to the operational earnings. The operational profit is an indicator of the continuing circumstances of the firm as well as the effectiveness of the management.

It is important to keep in mind that a thriving firm is characterised by a high operational profit. The following equation may be used to get the operational profit:

Operating profit= Net sales – Operating costs

Operating expenditures are any costs that are incurred in the process of operating a company. These costs might include things like payroll, utility bills (including rent and energy), and other office-related costs.

In addition to that, it comprises expenses related to research and development, as well as legal and banking fees. When calculating the operational profit for the company, it is necessary to subtract from net sales all of the additional fixed and variable expenditures that are included in the category of operating costs.

Profit margins

Additionally, one should look at the margins, as they provide insight into the “safety net” that the firm provides. In an ideal world, the profit should not come at the expense of the margin.

Therefore, a fall in the EBIT margin of the firm is an indication that the company’s profitability has taken a blow. This is the case when there is a negative number.

The Cost of Interest

The term “interest expense” refers to the sum of money that must be paid back to the lender for the use of a loan amount. As a result, an increase in the interest expense reflects an increase in the amount of debt owed by the firm.

Profit After Tax

The term “net profit” refers to the amount of money that remains after deducting operational profit, taxes, debt repayment, and other expenses.

It is one of the most sought-after pointers in a quarterly earnings report since it is a vital indication of the financial health of a firm.

It is important to keep in mind that a company’s profitability improves in direct proportion to the size of its net profit.

Earnings Per Share of the Company (EPS)

It is crucial for an investor to know how the earnings per share (EPS) is developing. If the firm is doing better, as indicated by a higher EPS, then investors will see more returns on their investments.

Earnings per share, or EPS, is often regarded as a particularly reliable gauge of a company’s success. This, in turn, leads to increased profits for the owners of the company.

The earnings per share (EPS) ratio provides investors with an idea of the room a firm has for expanding its present dividend, which is helpful for investors who are interested in a stable source of income. When comparing a company’s performance to that of other businesses, EPS should always be taken into account.

Gross Sales

Gross sales are the sum of all sales made in a certain time period by a particular firm. An indication that suggests that there is rising demand and that the health of the firm is excellent is an increase in gross sales.

Net Sales

The term “net sales” is used to refer to the total amount of a company’s sales after deducting the value of any discounts, refunds, and allowances. When reporting on the income statements alongside the top-line revenues, it is common practise to take into account the net sales. The health of a company may be more accurately determined by looking at its net sales rather than its gross sales.

Management

The commentary provided by management is often regarded as one of the most important aspects that an analyst looks at.

For the objectives of predicting and valuing, one makes use of the comments on the currently-running quarter as well as the guidance for the next one or two years.

Investors need to have a clear understanding of what the management team anticipates and how they intend to prepare for the future.

Comparison on a QoQ and YoY basis

This is one of the sections of analysing the quarterly results that requires the greatest attention to detail.Therefore, while analysing the quarterly performance, should we use a YoY basis or a QoQ basis?

To keep things simple, in general, we place a greater emphasis on a YoY basis since it more accurately represents the seasonality of the activities.

It presents the developments of the firm in a much more comprehensive light. However, in certain industries or firms where there is constant development and quick change, such as consumption, we have to additionally look at the changes that occur from quarter to quarter.

For instance, the telecom industry has lately seen some rise in their average revenue per user (ARPU), therefore in this instance, comparing quarter over quarter makes more sense than comparing year over year to obtain an accurate picture of the performance of the sector or the firm.

Bottomline

Quarterly results help the investors by providing information that helps explain the company’s performance numbers for the particular quarter. We hope that you found this blog to be interesting and that you will apply its lessons to the fullest extent possible in the real world.

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