Corporate earnings are the profits earned by a publicly traded company over a specific period, typically a quarter. These figures are reported by companies to the Securities and Exchange Commission (SEC) and are one of the most important data points for investors to review when making decisions about their portfolios.
The most widely cited metric for corporate earnings is earnings per share, or EPS. This figure is calculated by dividing net income by the number of shares outstanding. Higher EPS is generally seen as a positive, as it suggests that a company is generating more value for each share of its stock.
Besides providing insights into individual company performance, earnings reports can also reveal macroeconomic trends. For example, if a number of companies are reporting falling EPS, this may indicate that a wave of layoffs is on the way. On the other hand, rising EPS could be a sign of a healthy economy, as more people are buying goods and services.
Investors and traders tend to focus on different aspects of earnings reports, depending on their investing strategies. For example, long-term investors may place more importance on metrics that reveal a company’s stability and growth potential, such as revenue trends and EPS. On the other hand, short-term traders may be more interested in a company’s ability to meet or beat EPS estimates. In addition, a company’s earnings report may include other noteworthy information, such as dividend news or changes in management.