People who invest in shares of different companies, however, all know that quarterly earnings of the companies are announced at the end of four fiscal quarters December, March, June, and September and annual earnings are announced at the end of the fiscal year ending September every year. These are regulatory prescriptions of Securities and Exchange Control (SEC) of the USA. So, these are a must. Investors associated with investment in shares, not all are well versed with what the earnings seasons actually are, and more emphatically what the significance of it is, and they often do not have any idea as to how the earnings report is assessed.
The earnings report consists of different acronyms and jargons that are associated with the share market used within the industry insiders. The outsiders cannot understand that language resulting in the power to understand the affairs of the industry lies on the hands of the industry insiders. This situation leads you to let go to the financial expert to understand the affairs who charge fees for their services and advice. Saying this may be a little bit cynical, but still, as an investor, you should know the decisions that have been made by the company in which you have invested your money in shares. In order to do so, you should be familiar with some of the terms, acronyms, and jargons which are useful for assessing the earnings report and impacts of earnings on the stock price. A brief explanation of such terms is cited below.
What are Stock Earnings?
The term earnings, in general, are meant for net-income after tax. Sometimes it is also called the bottom line profit of a company. Earnings are the main driving force that determines that a company will run successfully and profitably in future. And profit ensures that all other circumstantial requirements to run the company are well within the controlled measure. It is already said that the companies report their stocks earning on completion of predetermined quarters and year. Now what you need to watch whether the earnings that announced by the company has deviated from the earnings that analysts estimated. If so, there will be a great impact on the share price of that company in the market. For example, analyst’s earnings estimate for Company X is $1 per share and in real earnings announcement it has come down to $0.80 per share, the stock price of the Company X is likely to fall due to that miss.
Earnings per Share and Price to Earnings Ratio
It is calculated by dividing the total earnings of the company for a period by the number of shares that are outstanding in the market. Earnings per share (EPS) are an important tool for relative valuation in
