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Earnings 101: Discover How to Invest during Earnings Season
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【Earnings 101】How do value investors respond when market fluctuates?

Reporter: "If investors decide to invest in stocks, how should they get more information about the company?"

Buffett: "Firstly, Investors should consider whether they know enough regarding the company and whether they deserve high returns. Collect information is important, especially the company's earnings report, including annual and quarterly reports, like me. But if you read these public documents carefully and still not sure about the company’s business, you’d better not invest or buy index funds."

Information that earnings reports provide enables value investors to find companies that are being ignored by Wall Street and invest in. For value investors, the confidence in their investment strategy comes from the analysis of earnings reports to obtain objective data and logical analysis based on the data, as well as their understandings of various business models. Why it is said that studying earnings reports is the first step in value investment? What is the role of earnings reports? What valuable information can we get? This article will answer for you.
【Earnings 101】How do value investors respond when market fluctuates?
1. Find the "suspicious points" in earnings reports

Some companies falsified transactions before going public in order to successfully complete IPO and raise funds as much as possible. Sometimes, listed companies tend to drive up the stock price. The higher the stock price, the higher the previous investors, executives or original shareholders will be able to cash out. Pay attention to the cash flow, debt and other information in the earnings report data, and you can protect your money. Click to learn previous article

2. Discover the core competitiveness

In emerging markets, the cradle of leading companies, demand is shaping and the capacity is hard to estimate. Raising competition barriers means that it will be able to occupy more market share in the future. Click to learn previous article

For example, FuboTV, as the first sport streaming media, released its fourth quarter 2020 earnings report on March 2. In the reported quarter, FuboTV acquired Balto Sport to enter sports betting industry and plans to provide free online sports games to enhance its "moat". But for FuboTV investors, they will pay more attention to its paid subscribers, because the amount of paid subscribers and advertising business are two major sources of its revenue.
【Earnings 101】How do value investors respond when market fluctuates?
3. Understand the business model

Value investment is to invest in an enterprise with good prospects, and the primary basis for determining the development prospects of an enterprise is its business model. Buffett also said that a good horse is an essential requirement for a good rider to win. Without a good business model, no matter how good the management team is, they can only offer mediocre results. In interpreting the company's earnings report, the ratio of interest expense to net profit, the ratio of accounts receivable and revenue, and the ratio of inventory to total assets could be evaluated.

Follow @moo_Live to get the lastest earnings conference call, and click to join ‘Earnings Season: mooers discussion’ to share your thoughts with mooers!
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more
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