Using Earnings, A Company's Report Card

Earnings are like quarterly report cards for companies. During earnings, companies make a public announcement about their profits or losses, and also provide guidance on what to expect in the future.  

Earnings announcements come in the form of a press release, a conference call (which you can listen to on Robinhood), and an official filing with the SEC “10-Q.”

Investors pay close attention to earnings calls because this is one of the few times you can hear a company’s CEO share how their company is performing.

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What’s the strategy?

Your decision to buy or sell a stock should be based on your belief in the value of a company.  

If the earnings call gives people more confidence in a company, stock prices often go up. If people lose confidence in a company’s performance, stock prices typically go down. Checking if a company’s stock price goes up or down after earnings is a great gut check to see how well the market believes a company is doing.

How do I see earnings on Robinhood?

Once you choose the company whose earnings you’d like to see, scroll down on its stock Detail page to the Earnings section. You’ll see the amount of profit a company made in the most recent quarters in terms of “earnings per share,” or EPS. You’ll also see the company’s next earnings announcement date.

What does “EPS” mean?

EPS, or earnings per share, is a dollar amount that represents the company’s overall quarterly profits divided by the number of shares in the market. This shows you the amount of profit the company made for each share of stock it has in the market.

Example: If Company ABC has 1 million shares in the market and just announced $10M in revenue, the EPS is $10.

How do I use EPS?

Many investors use EPS figures to better understand a company’s profitability and ability to meet profit goals. When profits are higher, it may indicate that the value of the company’s shares will increase. The opposite is true for when a company’s profits are down.

What is Actual EPS versus Expected EPS?

Actual EPS refers what a company reports during earnings, while the Expected EPS is what analysts predict a company’s earnings will be.

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