Earnings report

    All public companies periodically release an earnings report, which is essentially a financial statement outlining how the company has performed. It is an important way to communicate with existing and potential investors on the financial health of the company.

    If the earnings report is positive, demand for the company’s shares is likely to increase. If, however, it is negative, investors may react by selling the company’s shares.

    Earnings reports can be issued quarterly, every 6 months or once a year.

    What information does an earnings report contain?

    An earnings report can contain a lot of information but the key areas to focus on include:

    Earnings per share (EPS) – this shows the amount of profit as allocated to each share. The higher the EPS, the more demand there will be for the company’s shares.

    Revenue – this is the total amount of income generated by the company. The higher the revenue, the more demand there will be for shares.

    Net income – this is the amount of money the company has made after subtracting its costs. The higher the net profit, the more demand there will be for shares.

    Investors will often compare the data provided with previous earnings reports for that company. They can then use the available information to make a judgement about whether or not the company represents an attractive investment opportunity.

    For a more detailed introduction to company earnings reports, read our lesson: