How do you read and understand a company quarterly earnings report and annual report? What are the key numbers and material information to consider?

What is an Earnings Report?

An earnings report is a quarterly filing to report on a public listed company’s performance. It is available to the public and provides key financial information including the latest balance sheet, profit and loss, changes in equity, cash flow statement, notes to the financial statements, and performance review.

 

How often do Companies Report Earnings?

Companies report earnings quarterly (every 3 months) after the end of each quarter. In Malaysia, it usually takes one or two months after the quarter ends for the quarterly report to be released. For US companies, quarterly reports usually begin one or two weeks after the quarter ends in what is often referred to as “earnings season”. Filing is done to the Securities Commission Malaysia (SC or Suruhanjaya Sekuriti Malaysia) and Securities and Exchange Commission (SEC) respectively in Malaysia and US.

 

Why is an Earnings Report Important?

Earnings reports provide investors and potential investors information on how a company is performing financially. It helps investors to know if a company is performing to expectations and influences decisions on making investments in or out from a public listed company. It can be viewed as a regular financial health assessment of a company, and is the basis for analysis and projections for the future prospects of the company.

 

Key Info

Business Outlook

Found in: business outlook, director’s/chairman’s/CEO’s report, or message typically early in the annual report either right at the start or before the financial statements

Business outlook typically tells the story from the top guy (or top woman’s) perspective on how the company performed amidst the current economic and market situation. It helps shade light on significant performance highlights (whether good or sometimes bad), and where the company is heading to into the future.

 

Total Shares

Provides information on the total company stock held by shareholders including individual investors, institutional investors, and restricted shares owned by employees.

 

Dividend per Share (DPS)

DPS is the distribution of company earnings given to shareholders for each share held during the time period. Dividends can include regular and special dividend distributions. Some companies may not pay dividends, especially if they have better use for earnings to be deployed.

US share dividends: 30% tax rate

Malaysia share dividends: 0% tax rate

 

Shares Buyback

Provides information on shares buyback if approved by the company, any buyback done throughout the financial period, and if any treasures shares were cancelled.

Tip: search for “buy back”, “buyback” or “buy-back”