Free Trading School · Level 10: Fundamentals and the News
Company earnings and fundamentals
For stocks, the quarterly earnings report is the main fundamental event. Companies report revenue, earnings per share (EPS) and usually guidance for the coming quarters. Stocks can move 5 to 20% overnight on the result.
- Revenue: total sales. Growth here shows demand for the product.
- EPS: profit per share, compared with analysts' estimates.
- Margins: how much of each dollar of sales becomes profit.
- Guidance: management's outlook, often the biggest driver of the reaction.
| Ratio | What it tells you |
|---|---|
| P/E (price ÷ earnings) | How much investors pay for $1 of profit |
| Revenue growth | How fast the business is expanding |
| Debt-to-equity | How much the company relies on borrowing |
| Free cash flow | Cash left after running and investing in the business |
Holding a position through earnings is a gamble on a coin flip with a gap. Many swing traders close or reduce positions before the report.
Know the earnings date of every stock you trade.
Quick answers
For stocks, the quarterly earnings report is the main fundamental event. Companies report revenue, earnings per share (EPS) and usually guidance for the coming quarters. Stocks can move 5 to 20% overnight on the result.
Know the earnings date of every stock you trade.
Expansion. Above 50 means more businesses report growth than decline.
Next lesson: Trading around news safely