Company Results

Listed companies in India publish their financial results every quarter. The reports can look intimidating, but a few ideas go a long way.

Revenue, expenses and profit

Revenue, also called sales or turnover, is the money a company earns from selling its products or services. Expenses are what it spends to do so. Profit is what is left after expenses, tax and interest. A company can grow its sales and still make less profit if its costs rise faster.

Earnings per share

Earnings per share, or EPS, is a company’s profit divided by the number of its shares. It shows how much profit belongs to each share, which makes it easier to compare a company with its own past.

Compare like with like

Results are usually compared in two ways. Year-on-year compares a quarter with the same quarter a year earlier, which removes the effect of the seasons. Quarter-on-quarter compares it with the quarter just before. For businesses with festival or seasonal demand, year-on-year is usually the fairer comparison.

The three statements

• The profit and loss statement shows income, costs and profit over a period.
• The balance sheet shows what a company owns and owes at a point in time.
• The cash flow statement shows the money actually moving in and out.

A company can report a profit and still run short of cash, so all three are worth a look.

Why the share price may not follow

Markets react to whether results beat or miss what people expected, not only to whether they are good. A strong result that was already expected may barely move the price.

Key points

• Profit is what remains after expenses, tax and interest, and it can fall even when sales rise.
• EPS shows profit per share.
• Year-on-year comparisons are usually fairer than quarter-on-quarter for seasonal businesses.
• Read the profit and loss statement, balance sheet and cash flow statement together.