Truth Speaker Mitra (@SubhajitMitra) 298 Followers 05 Dec

Investment 711 2

Part II—Quarter profit or beating market estimates in sales may not enrich your stock portfolio

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PAT or profit after tax does not always ensure a bullish run of stock performance

1) Debt dive

If a firm meets profits expectations, but analysts and investors see that the company has taken on a lot of debt during its last quarter, to the point where it might be regarded as risky for the company, this would undoubtedly lead the stock price to decline dramatically on market opening.

2) Stock buyback

A stock price decline following an earnings surprise may also be brought on by the corporation repurchasing outstanding shares. The stock price of the company normally rises when it repurchases its own shares, and the financial statements also get better.

3) Liquidity adjustment

Large hedge funds try to enter and leave equities when there is greater liquidity, or in other words when a specific stock is seeing significant volumes of trade. They do this because they hold a substantial percentage of the company's stock and do not want to affect a stock's movement at times when trading volume is low.

After an earnings beat, a stock's price may decline due to news that not many investors are following.



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