Lately, I have been wondering about these few questions:
- What you will be looking at when a company release its latest quarter results?
- How you will go about in evaluating whether the company is still fundamentally strong based on the quarterly results (i.e. 1st quarter, 2nd quarter & 3rd quarter?
- Since its not a full year of performance, how you can gauge whether the company is doing fine right now or there are indication of bad performances aside from comparing quarter-to-quarter financial results?
Because I’m lost at what should I look at when I have the company’s latest quarter results (i.e. assuming that I have invested in the company).
These are the following things that I will look at in quarterly report:
- In the income statement, I will look at if the revenue and net profit grow? If yes, what is the reason for the growth, is it organic growth or there is one off gain? If no, what is the reason and is it temporary?
- In the balance sheet, I will look at the cash position and debt level of the company. I will get quite uncomfortable if the debt level or cash level sudden increase or decrease. I will go find the reason why.
- Under the notes segment, I will read through the management comment on the quarter and also their next 12 month thinking of the business.
- Most importantly, I will make sure that the reason that harm their quarterly result does not affect the company fundamental or business in a long run.
Lastly, I will like to stress that when investing in company, we should always look at the longer term perspective, sometime companies may strengthen their core business or moat but it may hurt their short term profit but in a long run it is beneficial for the company. I will like to encourage you to weight more on the annual report than the quarterly result.
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