Many a times we hear about companies coming up with quarterly results that tend to create either euphoria or a silent shock in the market. Quarterly results are the announcement by corporate, of the operational results at the end of each quarter. About a decade ago, only annual results were declared by the companies but later on stock market regulators mandated the declaration of half yearly results and then subsequently to quarterly results to bring in more transparency in the system. The figures representing huge profits, losses, increase in revenues, percentages hike in annual growth are no doubt important for the corporate business, but how much it is important for you as an investor is what we would discuss here.
Logically speaking, it makes no sense running a race and not being bothered about whether you win or loose. As an investor if you have invested your money in a company, it is very important to invest some of your time in knowing how the company has been doing. It helps to judge company’s performance over a period of time and keep a track of its growth or decline before it is too late. For example suppose you are holding shares of a company showing continuous decline in revenues for past 3 quarters. So looking into the results you decide to take out your money and invest somewhere else before the company gets ruined totally. Thus analysing the results, you can judge company’s current performance and future prospects and ultimately plan your investments based on that. It is as simple as tracking down your school report card which needs to be reviewed weekly to know if you still need any improvement. However its significance varies with the type of investor you are. It is more important for a short term investor or an intra-day trader than a long term investor as explicated below:
Long term investors
It is important to note that long term objectives of a company do not change every quarter. There might be many reasons due to which quarterly results of a company are not good. In short, a long term investor with investment period of 3-4 years is hardly affected by the quarterly results and it might prove mere wastage of time to keep analysing the results every three months. So a prudent long term investor will at least not get panicked with poor quarterly results but tend to find out the reasons behind it. Long term investment can be considered as a long tunnel and there is always light at the end of tunnel.
Short term investors
A short term investor might get affected by quarterly results in real sense. It has been seen over time that the markets are very sensitive to news of corporate results. The day blue chip companies like infosys declare its quarterly results; the BSE and NSE indices turn red or green depending on their results. These cause volatile sessions in the markets and hence short term investor or intraday traders may land up in huge losses or end up making huge profits.