The concept or field of trades and stocks is extremely tricky and rippling. You cannot be sure about anything hundred percent. But again you have to make the moves on the basis of what you think and what you get the instinct. Since the world of stocks and investments is a tricky one, you would not want to miss out on anything that might make or mar your growth or outcomes right?
Of course you can use Earnings surprise screener and find out what is happening or what can be expected in the stocks. The surprises in the stocks can turn out to be shocks if not taken carefully. There are myriad of things that can be taken into consideration when taking the steps. But have you ever thought about the reasons that stocks can Drop After that of Positive Earnings Surprise? Well, keep on reading to know something that you might not be having an idea about.
Estimates vs Expectations
The proper definition of an earnings surprise is when general earnings turn out to be higher than earnings estimates. But these are the estimates that are the “published” numbers from that of the brokerage analysts. You know sometimes or even quite often the investors incline to develop their own distinct set of expectations that can actually vary greatly from other analysts. The point is if there is so much of optimism ahead of the release, then the real earnings require being a puncture in order to pacify investors’ exaggerated expectations. It is the commonest reason why a few stocks fall after that of supposed earnings beat.
What is the quality of the earning?
The topmost quality earnings emerge from having strong revenue growth. It simply means that the products or services of a company are in high demand and must stay that way into the future. However, in the present time far too much of the earnings getting reported are made from price cutting and other type of “accounting gimmickry”. The problem with this thing is that the advantages of these moves don’t really last. When the market gets a smell that the earnings are unmaintainable, no matter how robust the beat, shares shall most likely collapse.
Do you have any idea about forward guidance?
In plain and simple words, when you purchase a stock you are taking a possession stake. And what really owners of companies do care about is the brook of future earnings. So in case a company beats earnings for the quarter only reported, but cautions those future quarters might see lower earnings, then such a stock is going to go down… and go down even faster.
So, the point is you have to be careful about the things you have attained and the things that might fall upon you. Just because something is good now, it does not necessarily mean that it is going to be great in the future too. It is especially so in the world of stocks.
Thus, the point is you can actually get the neck of everything if you keep your steps tactfully and even if you have to use any tools like screener; you should go for it!