Earnings Report Criteria

Here is a short list of some of the things I look for in Earnings Reports

1. Margins:

I like to see increasing margins or at the very least companies maintaining their margins.

This includes Gross Margins and Profit Margins

Gross Margins: (Net Sales – COGS)/Net Sales

Profit Margins: (Net Sales – COGS & Operating Expenses)/Net Sales

Net Sales = Revenues

2. EPS:

We are shareholders so it is about how much the earnings are “per share”

I like to see increasing EPS which signifies growth.

I compare to last Q and also to same Q last year (usually accounts for seasonality but has other shortcomings so I use both).

3. Revenues & Net Income:

We always prefer seeing both of these growing and increasing.

Net Income is especially important because it is about “what you keep” and it factors in the Revenues – Expenses (Margins) and is the NET.

4. FCF, CASH:

Always important to see increasing and growing CASH and FCF.

FCF Margins, FCF/Share, FCF Yields maintained or increasing

These can vary from Q to Q so a small margin of variability is fine as long as we do not see a declining pattern for consecutive quarters.

5. Guidance:

It is about the future!

I want to see increasing and raising guidance for Revenues, Net Income, Margins and, most importantly, EPS.