It’s that time of year again: reporting time for quarterly results! Yes! Listed Indian firms must submit their quarterly results to the stock market every quarter 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 March.
The quarterly results of a firm are becoming more significant in this age of rapid change since they are used to analyze the company’s continuous success. These days, corporations report quarterly results and provide projections for the next several quarters.
This information is crucial for analysts who work in the stock market since it provides them with critical knowledge.
Suppose you are an investor in the stock market who likes to do your analysis of firms. In that case, you may find that questions such as ” How to analyze quarterly results and How to interpret a company’s quarterly results” often come up.
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 analyzing the results for the quarter, we need to pay attention to the operational earnings. The operating profit is an indicator of the continuing circumstances of the firm as well as the effectiveness of the management.
It is important to remember that a high operational profit characterizes a thriving firm. The following equation may be used to get the operating profit:
Operating profit= Net sales – Operating costs
Operating expenditures are any costs that are incurred in the process of conducting a company. These costs include 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. Therefore, when calculating the operating profit for the company, it is necessary to subtract from net sales all of the additional fixed and variable expenditures included in the functional cost category.
Profit margins
Additionally, one should look at the margins, as they provide insight into the “safety net” that the firm offers. In an ideal world, the profit should not come at the expense of the margin.
Therefore, a fall in the firm’s EBIT margin indicates 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 money that must be paid back to the lender to use a loan amount. As a result, an increase in the interest expense reflects an increase in the debt the firm owes.
Profit After Tax
“Net profit” is a term used to describe the total amount earned after deducting all expenses. Of money 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 remember that a company’s profitability improves in direct proportion to the size of its net profit.
Earnings Per Share of the Company (EPS)
An investor must know how the earnings per share (EPS) develops. If the firm is doing better, as indicated by a higher EPS, investors will see more investment returns.
Earnings per share, or EPS, is often regarded as an exceptionally reliable gauge of a company’s success. This, in turn, leads to increased profits for the company’s owners.
The earnings per share (EPS) ratio gives investors an idea of the room a firm has for expanding its current dividend, which is helpful for investors interested in a stable source of income. When comparing a company’s performance to other businesses, EPS should always be considered.
Gross Sales
Gross sales are the sum of all sales made by a particular firm in a specific time period. An indication that there is rising demand and that the firm’s health is excellent is an increase in gross sales.
Net Sales
The term “net sales” refers 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 practice to consider 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 an analyst looks at.
For the objectives of predicting and valuing, one uses the comments on the currently-running quarter and the guidance for the next one or two years.
Investors need to clearly understand 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 analyzing the quarterly results that require the most incredible attention to detail. Therefore, should we use a YoY or QoQ basis while analyzing the quarterly performance?
To keep things simple, we generally emphasize 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 specific industries or firms with constant growth and quick change, such as consumption, we have to 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’scompany’s performance numbers for the particular quarter. We hope that you found this blog interesting and will apply its lessons to the fullest extent possible in the real world.
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