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Earnings 101: Discover How to Invest during Earnings Season
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Meta Moo joined discussion · Jan 21, 2021 07:59

[Earnings 101] 6 Most Important Indicators You Must Know!

Hi, mooers! So far, moomoo has broadcast more than 20 earnings conference calls via @moo_Live . Have you gained some knowledge and understandings regarding earnings report? And do you know which indicators we should stress on? Let's learn together!

Earnings Per Share (EPS)

It refers to the ratio of net profit to total equity, which is one of the important indicators for evaluating the investment value of a stock and a basic indicator for analyzing common stocks. EPS, to some extent, can reflect the company's profitability.

Tesla $Tesla(TSLA.US)$ will announce its earnings report on January 27, and the market expects its EPS of 2020 Q4 to be $0.6, a year-on-year increase of 131.7%. Tesla's Q4 global deliveries exceeded the 180,000, so can its earnings meet expectations?

Free Cash Flow

Free cash flow refers to the maximum amount of cash distributed to shareholders and creditors without threat stems from survival and development of the company.
For example, Netflix $Netflix(NFLX.US)$ said in its 2020 Q4 earnings call that its subscribers exceeded 200 million, and increasing subscribers tend to pay for high-quality content. Then its cash flow will become positive in 2021, which makes stock buybacks come true.
[Earnings 101] 6 Most Important Indicators You Must Know!
P/E Ratio

Price to Earnings ratio, the core indicator of the relative valuation method, is one of the most widely used indicators to assess whether the stock price level is reasonable. The higher the value, the higher the popularity of investors in the market. But is the higher the P/E ratio the better? Nvidia $NVIDIA(NVDA.US)$ told us a true story. Click to learn more

Gross Profit Margin

Gross profit margin represents the competitiveness of an enterprise. High profit margin reflects great profit margin of products and strong profitability of the business.

Net Margin

It is defined as the net profit after the payment of corporate income tax, and also as a measure of the final profitability of the enterprise in certain period. The higher the net profit, the stronger the company's profitability.


For example, the data shows that Intel’s $Intel(INTC.US)$ earnings in the first third quarter of 2020 are gradually declining. In the case, Intel’s CFO George Davis explained that growth was mainly concentrated in areas with lower prices, which weakened profitability.
[Earnings 101] 6 Most Important Indicators You Must Know!
Return on equity (ROE)

ROE is the core indicator to measure a company's profitability. It is the ratio of the company's net profit to the shareholders' equity, which represents the shareholder's investment income.

Conclusion
The earnings report is a storybook. Only by understanding important indicators can we predict the development of the story.

Thank you for reading, and if you are interested in anything else about earnings report, please let us know in the comments!
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more
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