Impact
Of Company’s Quarter Result on Stock Price
Quarter
results of all listed companies are released as per SEBI guidelines. Due to
which a very rapid fluctuations in stock prices can be seen. Sometimes a minor
jump in sales figures drive the stocks in green and several times stocks fall
after increasing in sales number also. It’s almost impossible to analyze the
quarterly result in one go just after seeing the flash of news on TV.
There
are certain key things which can be analyzed in quarterly result:
·
Gross Sales: It’s basically a number of total
sales figure.
·
Net Sales: From gross sales, one can derive
net sales by deducting sales return, sales allowances, and sales discount from
gross sales.
·
Operating expenses: To run a business there is a
minimum base requirement of capital to operate. Basically this is the cost of
running a business. Salaries of employees, electricity, legal fees and business
license are some of examples of operating expenses.
·
Operating Profit: When operating expenses are
deducted from net sales we get the operating profit or Earnings before interest
tax depreciation and amortization (EBITDA).
·
Net Profit or net income: In the income statement we can
find details about tax and loan repayment which when deducted from operating
profits gives us the net profit.
Apart
from above mentioned key points there are several more things which can be
analyzed by studying quarterly result of a company. All these key parameters
are basically viewed and analyzed under the branch of fundamental analysis and
in a long run all these key numbers will be reflected in share price.
On
a view to judge the quarterly result for trading purpose one has to speculate
the market price and one has to focus on only one thing “expectation”. It is a
wrong sentiment that profit means price hike and loss means price drop. There
is no any thumb rule like this but if market is expecting a profit of 100 of
Xyz Company compare to previous quarter number of 200. In this case profit is
going to be declined but if expectation is of 100 and result came of 150
although it is reduced compare to previous quarter number but it is more than
the expectation so market will react accordingly.
It
just depends on the individual that how one looks at the quarter result either
for a long term view or a short term view, one is speculating the price or
depending on fundamental aspects. But one thing is certain that either it take
a time of week month or years the impact of result will be reflected in share
price.
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