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5 considerations to make the most out of earnings season


By Bitpanda


Another quarter of the year has just passed and markets remain in a bearish phase, investors are still navigating choppy waters. While some increase in volatility is inherent in an earnings season, let’s look at how you can get the most out of your investments.

What is earnings season?

Earnings season, also referred to as “reporting season” is a time period that happens four times a year. It marks the first month of a (new) quarter, during which companies publish reports on corporate performance from the previous quarter or year. These reports provide details on items such as net income, profit and loss statements, earnings per share, sales revenue and more. These four time periods are traditionally the months of January, April, July and October and each starts about a week after a previous quarter (3-month-period) has ended.

As you likely learned after reading our article on quarterly reports and how to use them, the publication of quarterly reports is not mandatory in some countries but is in many others. Still, a growing majority of companies are opting to participate in earnings season owing to increasingly multinational structures of business in numerous industries. 

Why is earnings season important for investors?

Imagine earnings seasons as a time of assessment for your investments that you want to mark in your calendar, just like reviewing your personal household budget or your financial goals. If you are looking to invest in stocks or you already hold shares in a company, you are anticipating that the value of this company is eventually going to increase. 

If this is the case, investors are usually going to receive a percentage of that company's income in the form of dividends, and the value of your stock is likely going to surpass the purchase price of your original investment. To ensure that your investment journey sets you up on a successful path, even when times in the stock market are turbulent, consider the following factors to make the most out of each earnings season.

1. Learn how to read earnings reports

While reading company reports may not seem like the most enticing prospect for some newbie investors, don’t be intimidated. With just a little practice, you won’t only learn how to get an overview of a company’s development, you will also discover how to put the pieces together and understand why a company is performing well - or not so well. For instance, how did the price development of timber affect the construction industry as a whole? How are the changes by a new management board panning out? When can I buy the stock of my dreams?

2. Keep the bigger picture in mind

While the world is plagued by adverse geopolitical factors, high inflation rates, a global pandemic and other developments causing uncertainty and volatility in the markets, don’t forget to stay rational when assessing the profitability of companies that you have already invested in. 

Earnings season offers investors insights into a company's outlook. Since a quarterly report can lead to a change in market direction, it is important that you use this information in a measured and sustainable way instead of reacting emotionally. Compare solid performance over several quarters as well as previous year’s time frame and performance of similar companies in the industry. Don’t forget that most companies don’t have a separate quarterly report for the fourth quarter of the year, so make sure to extract the figures for Q4 separately.

How are the company’s fundamentals looking? Is their development stable or not? Is the company posting healthy growth? How is it affected by global developments in the short term, and what are possible scenarios for the medium term? 

3. Develop your strategy for earnings season ahead of time

Earnings season is not just important for doing your research on your existing holdings, you should also consider drawing up a trading strategy just for this time period. Think about your approach towards investing, your profit targets, how much time you spend on your investments and your personal risk profile. Are there stocks you have been considering investing in? 

Inform yourself ahead of time on the season’s most anticipated movers and expected volatility and check out analyst forecasts during your research - but don’t forget: an expectation is merely an expectation and actual figures may be different. Finally, take the opportunity to catch up on the companies’ latest developments and performance once you have their most recent earnings report in hand.

4. Assess your experience

Right after the end of earnings season, take the time to review what happened and what changed regarding your investments. This is also the perfect time to set up a personal investment journal for tracking your investments - just like you track your personal fitness, your sleep or other personal goals. Jot down any opportunities that you retrospectively feel you missed and make sure you don’t miss organising earnings reports, dates and other materials on companies that sparked your attention - for the next earnings season coming up in three months.

5. Take care of your financial health

You know we were going to write this: after earnings season is… before earnings season - and this means it’s time for financial education. If you have been investing for a while, the periods in between earnings season are the perfect opportunity to delve into deep dives on the intricacies of analysis, historic moments in the markets and their effects and learning more about stocks you are looking to explore. How are your favourite investments doing? Look at your portfolio diversification.

Where can I start investing in stocks?

With Bitpanda Stocks, you can invest in fractional stocks* and ETFs*, from as little as €1, commission-free and with tight spreads. We now offer more than 2,000 assets on our platform. This is made possible by derivative contracts covered by the underlying stocks and ETFs.

The information shared in this article does not constitute investment advice. Investing in financial instruments carries risks. Conduct your own research before concluding a transaction.

*Stocks and ETFs are the underlying assets of the contracts offered as Bitpanda Stocks and are brought to you by Bitpanda Financial Services GmbH. More information about the product and the PRIIPs KIDs are available at bitpanda.com.