In this article, we’ll cover:

• Why investors use EPS
• How to calculate EPS
• Drawbacks of EPS
• Basic EPS vs. diluted EPS

The importance of earnings per share

Determining whether it may be profitable to invest in a company’s stock is a core question for investors. Although it has its limitations, EPS can be a satisfactory indicator of a company’s profitability and cash flow now and in the future. The higher a company’s EPS, the more potential profit investors may expect to earn on their stock holdings. 

It’s common practice for investors to consider EPS before investing in a company. Good EPS generally reflects both growth and acceleration over time, meaning shareholders may receive increased dividends. The SEC requires companies to submit EPS income reports quarterly and annually, making the information accessible and easy to track. And EPS is the only ratio that publicly traded companies are required to report. 

That said, a single EPS value for one company won’t give you the full story. The number is more valuable when it’s measured against other companies in the same industry and compared to the company’s P/E Ratio.

EPS formula: how to calculate earnings per share

EPS equals the difference between net income and preferred dividends, divided by the average number of outstanding common shares. Net income is the money available to all shareholders after a company accounts for all costs and expenses. Preferred dividends refers to the cash dividends paid to preferred shareholders. Outstanding common shares refers to the number of common stock shares a company has issued to investors and company execs. 

Earnings per share = (net income – preferred dividends)/avg. number of outstanding common shares

1. Determine the company’s net income from the previous year
2. Determine the number of common shares outstanding
3. Divide the net income by the number of outstanding shares

EPS example

Using the formula above, you can calculate the hypothetical EPS for shares of Apple. For this example, say that Apple’s net income for the past year totaled $99 billion, and preferred dividends totaled $10 billion. If outstanding common shares totaled $16 billion, EPS would equal $5.56.

$5.56 = ($99 billion – $10 billion)/$16 billion

Limitations of EPS

It’s important to remember that EPS is not a metric that should be used in isolation. There are limitations and drawbacks to relying on EPS alone: the numbers can be manipulated through the buyback of shares, unreported debt, inflation, and other factors. Things to keep in mind when you’re evaluating EPS include:

• Potential for manipulation: Organizations can manipulate EPS through stock splitting or the buyback of shares. When a company repurchases its own shares, it reduces the number of shares in issue, which automatically increases EPS.
• Debt: Because EPS doesn’t take into account a company’s debt, the earnings per share numbers could look good despite the potential negative impacts of a company’s debt on profitability and cash flow.
• Inflation: EPS doesn’t take inflation into account, so the numbers may be distorted. The P/E ratio is a better reflection of how inflation affects value. When inflation is high, P/E ratios are low; when inflation is low, P/E ratios are high.
• Financial leverage: Borrowing money to make an investment that will hopefully lead to greater returns is always a risk, and it can affect a company’s bottom line. A higher degree of financial leverage means a company’s EPS may be more volatile.

Basic earnings per share vs. diluted earnings per share

Basic EPS takes into account only common shares, while diluted EPS includes employee stock options, convertible securities, and secondary offerings. If exercised, these investments could increase the total number of shares outstanding in the market, thereby diluting EPS. Diluted EPS calculations are always lower than basic EPS, and many analysts consider them to be more accurate figures and predictors of profitability. To calculate diluted EPS, take the company’s net income minus preferred dividends, then divide the result by the sum of the weighted average number of shares outstanding and dilutive shares. 

The bottom line: Look deeper than EPS

There’s no one way to determine what counts as a “good” EPS; it’s dependent on each company’s full financial picture and the market expectations. EPS may be the bottom line on the income statement, but it doesn’t provide a company’s full story on its own. When you’re making an investment decision, take the time to evaluate a company’s stock by tracking EPS over time and comparing it with other companies in the same industry. Remember that basic EPS can be manipulated, intentionally or not, through buyback and financial leverage. Use P/E ratio as an additional tool to assess the accuracy of EPS, and remember to consider the diluted EPS calculations for a clearer picture. 

The post What is Earnings Per Share (EPS)? appeared first on Stash Learn.

Despite the retail industry’s strong Black Friday and Cyber Monday performance in 2019, some brick-and-mortar stores such as Macy’s and Pier 1 Imports are reportedly closing hundreds of locations as they face declining sales.

Closing Soon

On January 8, 2020, Macy’s Inc., the parent company of Macy’s, Bloomingdale’s, and Bluemercury reported a 0.6% decline in sales in November and December 2019. This news followed Macy’s November, 2019, third-quarter earnings report, which shows a 3.9% decrease in sales following seven consecutive quarters of growth.

Macy’s, which employs 130,000 people, will reportedly close 28 of its stores and 1 Bloomingdale’s store throughout the United States in an attempt to increase its profits, according to sources. Macy’s will announce which stores will close on February 5, 2020. (In 2016, it announced the shuttering of 100 locations, following six consecutive quarters of losses.)

Macy’s CEO Jeff Gennette said in a press release that website issues, lower tourism rates, and weak performance in certain malls caused the dip in sales. He also cited a warmer shopping season as a reason for the drop. Shopping trends may actually change with the weather according to the Bureau of Economic Analysis (BEA). The BEA accounts for how weather patterns can affect data when it calculates the Gross Domestic Product, or GDP.

Department stores are reportedly struggling to keep up with the rise of discount stores such as Target and Walmart, which have adapted more quickly to the consumer shift toward online shopping, and also offer a wider variety of products to consumers, often at cheaper prices. They also compete with online-only retailers like Amazon that offer steep discounts and quick delivery times.

Meanwhile, home goods store Pier 1 Imports announced an 11.4% drop in sales from the previous year on January 6, 2020. This most recent quarter of losses is the latest in a series of nine quarters of losses for Pier 1 for a net loss of $59 million, according to Forbes. As a result, Pier 1 will close half or 450 of its stores nationwide.

Pier 1 will also reportedly lay off 40% of its employees and prepare to file for Chapter 11 bankruptcy. The company employed 4,000 people as of March, 2019. The rise of e-commerce businesses such as the furniture company Wayfair have contributed to Pier 1’s losses, according to Bloomberg.

Online Traffic is Up, Foot Traffic is Down

In 2019, online retail sales on Black Friday and Cyber Monday broke records, with shoppers spending $9.4 billion on Cyber Monday, according to Adobe Analytics. While online sales may be surging, foot traffic on the traditional shopping weekend to so-called brick and mortar stores fell by 6.2%, according to reports.

Macy’s and Pier 1 aren’t the only brick-and-mortar stores falling on hard times. In fact, the traditional retail industry has experienced significant problems in recent years, with several physical stores filing for bankruptcy or closing locations including J.C. Penney, RadioShack, Payless ShoeSource, and The Limited.

More about the Retail Industry

Since 2017, the retail industry has lost 140,000 jobs, according to recent reports.

The retail industry is also one of the largest segments of the economy, generating nearly $5 trillion in sales in the first ten months of 2019, according to the U.S. Census Bureau. That’s roughly one-quarter of the GDP, which is the total of all goods and services the economy produces.

Retail is also a big employer. About 16 million people work for U.S. retailers, or one in nine people, according to recent reports. Nearly 5 million people work as retail salespeople, according to the Bureau of Labor Statistics. The impending closures and layoffs at Macy’s and Pier 1 could affect thousands of retail employees.

Follow the Stash Way

Investing in the retail sector is one way to diversify your portfolio. Diversifying is part of the Stash Way. When you’ve diversified your portfolio, it will hold a variety of investments that are not all subject to the same market risks, including stocks, bonds, and cash, as well as mutual funds and exchange-traded funds (ETFs).

The post Why Pier 1 is Walking the Plank appeared first on Stash Learn.

And if you’ve invested in the stock market, or are thinking about it, it’s important to pay attention. Publicly traded companies are required to file something called an earnings report every quarter. Earnings season is one of the best ways to get current information about companies whose stock you own, or are thinking of purchasing.

Although key indexes such as the Dow Jones Industrial Average and the S&P 500 are at or near record levels, experts are concerned that the trade war with China, as well as slowing economic growth nationally and globally, could result in lower earnings this quarter.  In fact, two-thirds of companies that issue earnings estimates have reportedly issued negative forecasts—meaning their revenue and earnings growth are likely to be lower than they expected.

Who is reporting?

More than a thousand companies are reporting—including in the financial services, health care, real estate, and technology sectors. Already,  big banks including Citibank, JPMorgan Chase, PNC Bank, U.S. Bancorp, and Wells Fargo have filed earnings reports. A number of consumer companies, including Alkaline Water Co., Domino’s, Johnson & Johnson, and Levi Strauss, as well as some of the largest U.S. airlines, have also reported their most recent financial results.

What’s a quarter?

Simply put, a quarter is a way to divide up the year, most often for financial accounting purposes.

A quarter happens every three months. According to a standard calendar year—one that begins on January 1 and ends December 31—the first quarter ends on March 31. The second quarter ends on June 30. The third quarter ends on September 30, and the fourth quarter ends on December 31. But companies can, and often do, divide up their years into quarters that follow something called a fiscal year, for accounting or other purposes. In that case, they can structure their quarters to end in any three month period.

What are earnings again?

Earnings are an accounting of how much a company has made or lost during a quarter, or for the year. Plenty of things go into an earnings report. Among them are an accounting of sales, revenue, earnings per share, losses, acquisitions of other companies, and other critical financial information. You can learn more about earnings reports here.

How can I find out more about company earnings?

Earnings are public, and companies file their reports every quarter with the Securities and Exchange Commission (SEC). The SEC even has a website called EDGAR,  where you can search on any publicly traded company and read its quarterly earnings reports. Quarterly earnings reports are called 10-Qs.

The post Why You Should Pay Attention to Second Quarter Earnings appeared first on Stash Learn.

It’s worth paying attention because retail is one of the largest sectors making up the economy, with more than 1 million private stores, and approximately $300 billion in monthly sales, according to the National Retail Federation trade group.

Several large chains in the traditional retail sector had a hard time in the first quarter, with mega-stores including J.C. Penney and Kohl’s reporting declines in sales as consumers shop more online and as tariffs from the trade war have hit retailers. Others in the sector scored some gains, however.

Here are some details about the performance of Best Buy, Home Depot and Target, three of the largest retailers in the U.S.

Home Depot earnings

Home Depot reported $26.4 billion in sales in its first quarter, an increase of 5.7% compared to the first quarter of 2018.

• It reported a profit of $2.5 billion, an increase of 4.5% compared to the same quarter a year ago. Reminder: profit is sometimes referred to as net income. It’s what a company clears after it pays its expenses.
• Same store sales—or sales of Home Depot’s stores open for at least one year—reportedly increased 3% in the U.S., less than the analyst estimates of 4.2%, according to reports.
• Home Depot reported earnings per share (EPS) of $2.27, beating analyst expectations of $2.18, according to CNBC. EPS is essentially the company’s profit allocated on a per share basis.

Home Depot executives reportedly have said they expect to lose $1 billion over time as a result of new tariffs from China.

Target’s e-commerce business

Target’s e-commerce sales surged 42% in the quarter, according to its earnings report, as more customers ordered online and then picked up their purchases in store parking lots, or in stores within an hour of making purchases.

• Target reported a total revenue of $17.6 billion, compared to revenue of $16.7 billion for the first quarter of 2018.
• Same-store sales increased by 4.8%, compared to 3% for the first quarter of 2018.
• Target reported earnings per share of $1.53, an increase of 16% compared to the same period a year earlier.
• For the year ahead, however, Target forecasts same-store sales growth in the low to mid-single digits.

Best Buy and the Geek Squad

The electronics retailer beat analyst expectations with better than expected earnings, according to sources.

It expanded its profit margin thanks to higher cost services such as Geek Squad, its tech support service, according to Reuters. However, Best Buy reportedly announced that new tariffs on Chinese products would force it to increase product prices for customers.

Note: Best Buy is reporting for its fiscal year 2020.

• It reported total revenue of $9 billion for the current quarter, about equal to its revenue for the first quarter of 2019.
• Best Buy reported a profit of $265 million, an increase of 27% compared to the first quarter of 2019.
• Same-store sales in the U.S. increased 1.3%, compared to an increase of 7% for the first quarter a year ago. Online sales in the U.S. increased 14.5%, compared to an increase of 12% for the same quarter in 2019.
• Best Buy reported earnings per share of 98 cents in the first quarter, compared to 72 cents for the same quarter a year ago.

Special note: Some companies—such as Best Buy—may follow a fiscal year that can differ from the regular calendar year, which ends December 31. The current calendar is in the second quarter, which ends June 30. Home Depot and Target are now reporting their fiscal first quarter earnings for 2019. Best Buy is Reporting for its first quarter 2020.

You can find out more about earnings here.

Remember the Stash Way!

All investing carries risk, and it’s possible for stocks, bonds, and other securities to lose money.

Stash recommends following the Stash Way, which includes regular investing, diversification, and investing for the long term.

When you buy single stocks,  you run the risk of not being diversified.

Diversification means you’re not putting all of your eggs in one basket, so you can better weather the stock market’s ups and downs. That means you won’t put all of your money in too few stocks, bonds, or funds.

When you’ve diversified your portfolio, it will hold a variety of investments that are not all subject to the same market risks, including stocks, bonds, and cash, as well as mutual funds and exchange-traded funds (ETFs).

By diversifying, you’ll be choosing investments in numerous economic sectors—not just the hot industry of the moment—as well as in different geographies around the globe.

If you purchase Best Buy, Home Depot, and Target stock, you could be increasing your investment risk by owning single stocks. If you already own these stocks and you buy more of them, you could increase the risk of being overexposed to these companies.

The post Learn More About Retail Sector Earnings appeared first on Stash Learn.

The company, which along with rival Uber, has upended the taxi and limousine industry, is seeking as much as $2 billion dollars from its upcoming sale of stock to the public, according to its stock prospectus.

Here are some key details:

• Lyft expects its stock to debut at a range between $70 and $72, according to its prospectus.
• The company has set a target valuation of up to $23 billion. That means the company hopes to be worth that much when it sells its shares to the public in April. How do companies set a valuation? They take into account a combination of things in the business, such as assets, or the things it owns, as well as stock price, earnings and cash flow.
• Lyft had revenue of $2.2 billion in 2018, double its sales in  2017.
• The company lost nearly $1 billion in 2018, according to its SEC filing, an increase of 32% compared to its losses for 2017. When companies lose money rather than make money, it’s often not a good sign for investors. However, many successful companies—Amazon for example—regularly report losses as they launch new products and services and grow.

A competitive ride-share market

Lyft’s biggest rival Uber also plans to go public this year, and is likely to surpass Lyft with a valuation of $120 billion, according to reports. As Lyft ventures into scooter and bike sharing, as well as new technology such as self-driving cars, it faces a raft of other competitors such as Apple, BMW, and Google, as well as Baidu, Waymo, and Lime.

Lyft says in its regulatory filing, the ride-share market in the U.S. is potentially as big as $1.2 trillion.

Two types of shares

Lyft will list two types of shares. It will sell class A shares to the general public, and will maintain class B shares for the company founders and other company insiders. The class B shares have 20 times more voting rights than the class A shares.  Increasing numbers of Silicon Valley startups have used this so-called dual-class share structure, which enables owners to maintain control of their companies indefinitely.*

More background

Lyft has nearly 40% of the U.S. ride-share market, according to reports. According to Lyft’s filing, it had 30 million riders and 1.9 million drivers in 2018.

Logan Green and John Zimmer co-founded Lyft in 2007. Following the IPO, the value of their stock is estimated to be worth $570 million and $390 million, respectively.

If you want to find out more about an IPO, read here.  And if you want to learn about a stock prospectus, click here.

*Note: It’s important to remember that all investing involves risk, and that it’s possible for stocks, bonds, and other securities to lose their value due to changing market conditions. Additionally, following an IPO, the market price for the newly issued security, or stock, may be subject to significant fluctuations in response to factors such as lack of liquidity, as well as market and price volatility. Oftentimes, fluctuations are due to the expiration of a lock-up period where company insiders such as employees sign an agreement that prohibits them from selling shares for a specified period of time (in the case of LYFT this is 180 days). When lock-up periods expire, all insiders tend to sell their stock in order to realize profit, depressing the stock price in the process.

The post What to Expect from Lyft’s IPO appeared first on Stash Learn.

The company, based in Palo Alto, California, has been publicly traded on an exchange called the Nasdaq since 2010.

Following the announcement, the Nasdaq halted trading of the company’s shares. (It then resumed trading less than two hours later.)

Musk has proposed making existing shareholders partial owners in the newly-private company by setting up a fund that would hold their shares. He has also floated the idea of buying shares at $420—about 20% higher than its current share price—which would value Tesla at $72 billion, according to the Wall Street Journal.

So what does all this mean?

What happens when a company goes private?

It’s the opposite of when a company goes public, or has an initial public offering. (That’s when a private company lists on a public exchange, such as the New York Stock Exchange or Nasdaq.)

Companies generally go private when another company makes a bid for the company’s shares. Executives of the company might also make a decision to take the company private, and buy the outstanding stock from shareholders.

When a company goes private, its shares are delisted from an exchange, which means the public can no longer buy and sell the stock. The company may offer existing investors a price for their shares that may be above the current level.

Why would Tesla go private?

Private companies don’t have the same level of scrutiny that public companies do.

When companies are public, they must file quarterly earnings reports with the Securities and Exchange Commission (SEC). These reports are filled with details about the company’s profit (or lack of it), revenue, debts, and changes to management, among many other details.

Private companies are not required to file these reports.

In recent years, for example, Tesla has been widely criticized for burning through hundreds of millions of dollars in cash and missing production deadlines, which has been widely broadcast following its earnings reports.

By going private, a company can often avoid regulatory scrutiny and the need to make public filings about its hits and misses. And that appears to be at least one motivation for Musk’s hope to go private. In a letter to shareholders Tuesday, Musk wrote:

“Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term.”

Good to know

It’s important to realize that many executives who intend to take their companies private often don’t, according to Financial Industry Regulatory Authority (FINRA). Announcements about going private can often boost a company’s share price temporarily, according to FINRA.

Tesla’s stock increased about 10% following Musk’s announcement, when the stock resumed trading, according to reports.

Have other companies gone private?

Yes, recent examples include computer maker Dell, ketchup manufacturer H.J. Heinz, and the supermarket chain Safeway.

The post Elon Musk May Take Tesla Private: What Does That Mean? appeared first on Stash Learn.

It’s pretty different from the prospectus an ETF or mutual fund files, because it’s likely to contain many more details. The average investor might find much of this information confusing.

That said, it’s still important to be able to read a stock’s prospectus, especially if you’re considering investing in a company. The prospectus can give you an important snapshot of what’s going on inside the company.

What is a prospectus?

In the case of a U.S. stock, the prospectus is called an S-1 filing. (If a non-U.S. company files for an IPO on a U.S. exchange, it files something called an F-1).

Companies are legally required to file this document, and just like a fund prospectus, you can find the S-1 of any public company at the SEC website, called EDGAR.

What will you find in the S-1? ou You’ll get a sense of the company’s performance and other details that relate to how it operates.

For example, you’ll find out how much money the company actually makes, how much debt it has, and whether the company is profitable. You’ll also find out who runs the company, and how well they’re compensated.

Here are some of the most important things to look for in a stock prospectus:

The prospectus can give you an important snapshot of what’s going on inside the company.

Investment bank: The investment bank, or the underwriter, helps the company go public by purchasing the shares and reselling them to investors. It also makes a market for the stock. That means it ensures there are enough buyers and sellers of stock on the first day the stock trades. By knowing which investment bank the company used to go public, you can get a sense of the reputation of the financial backers behind the company.

Number of shares to be sold to the public: Near the top of the S-1, the document will also tell you how many shares the company is selling, and how much money it hopes to raise through the sale. For example, the prospectus may say that the company plans to sell 1 million shares at a price between $14 and $16 per share. That means it’s hoping to make between $14 and $16 million by selling shares. (A lot goes into whether or not the company can actually sell the shares for that much money, and at the end of the day, it may not be able to do so if there is too little demand for the shares.)

Balance sheet: This portion of the prospectus lays out the company’s assets, as well as any liabilities, or debts, it may have. It will tell you how much cash a company has on hand, as well as the value of its assets, which could include property, machinery, or office space. It will also tell you the dollar value of its debts, which is a critical number to know if you’re considering investing in any company. The balance sheet can help you determine the actual value of a company.

Income statement: This will tell you lots of things about a company’s operations. Two of the most important things are revenues, sometimes referred to as sales. The other is net income, or profit. The income statement will tell you about the cash flow from operations of a company, usually over a period of two to three years.

Management: The company’s executives are also named in the S-1, as well as the members of the board of directors. They’re important to know about  because they lead the company, and will have a big impact on the performance of the business. In the section about executives, you’ll also find information about their salary and other compensation, not to mention how much of the company they own.

Risks: Companies that are just listing on an exchange are likely to have more risks than mature companies, and those risks are detailed in the S-1. These can include market risks, due to competitors in the same space, the general ability to get loans to fund operations, regulations that can tamp down on earnings, or risks from having an executive who defines the company, and without whom the company could experience difficulties. The risk section might also tell you if the company has any ongoing litigation that could impact earnings and performance.

Good to know: The prospectus, or S-1, is just the start. Public companies are required to file quarterly financial documents with the SEC, called earnings reports. They must also file annual documents detailing executive compensation, and any important changes or developments that affect the company and its potential performance.

The post How Do You Read a Stock Prospectus? appeared first on Stash Learn.

The social networking app surprised investors on Tuesday by reporting strong growth in its fourth quarter.

The creator of the disappearing instant message service has disappointed investors for months with poor earnings and a flagging stock price, which has fallen by nearly half since a high of $27, shortly after its initial public offering in March, 2017.

Why is Snap popping?

Although Snap reported a loss of $350 million in the fourth quarter of 2017, its revenue increased 72% to $286 million compared to the fourth quarter of 2016, according to its most recent filing with Securities and Exchange Commission (SEC).

The revenue increase stemmed from strong ad sales, according to reports. Snapchat’s use of self-serve software for advertisers increased ad impressions–or the number of times an ad is viewed–by 575% in the quarter, according to Reuters.

The social networking app surprised investors on Tuesday by reporting strong growth in its fourth quarter.

Snap also reportedly tripled the number of advertisers buying on its automated auction site over the same time period.

Revenue per user, an indication of how much money each customer earns Snap, increased 46% to $1.53, according to the company. And the number of Snap’s daily active users increased 5% to 187 million in the quarter.

News of the good quarter–the first time the company beat analyst expectations since it went public, according to Bloomberg–sent Snap’s shares up about 40%, to $20.67 in late afternoon trading Wednesday. *

Other things to keep in mind:

• At the time of Snap’s IPO, it was one of the most richly valued Internet startups since Facebook, with a market value of $24 billion.
• Back in November, China’s Tencent, the Internet services giant, swooped in and purchased an additional 12% of the company in after hours trading.
• Snap is still not profitable. It reported a net loss of $350 million in the fourth quarter. It reported a total net loss of $3.4 billion for the full year 2017.

The post Why Snap’s Share Price is Suddenly Popping appeared first on Stash Learn.

When you invest in the stock market, you’re typically buying shares in publicly traded companies. These companies have gone through a process called an initial public offering or IPO, where the company’s shares are listed on a stock exchange such as the New York Stock Exchange or the Nasdaq.

Once their shares are listed, public companies must file information about their performance every quarter, and this information is available to the public to examine.

Companies file their quarterly paperwork with an agency called the Securities and Exchange Commission (SEC), which is the federal agency overseeing publicly listed companies, to make sure they are following financial reporting regulations.

Financial analysts who cover companies and specific industries pay careful attention to earnings reports for indications about the performance of a particular company, and its future prospects.

You can find information on any publicly listed company by searching here.

What’s a quarter?

A quarter is a three-month period during the course of a year. There are four quarters in a year. Generally speaking, the first quarter ends March 31. The second quarter ends June 30. The third quarter ends September 30. And the fourth quarter ends December 31. (Some companies may follow other schedules for their fiscal years.)

What kind of information will I find?

Every quarter, public companies file a form with the SEC called a 10-Q. This is a company’s earnings report, and in it you’ll find specific data about a company’s financial accomplishments in the prior three months, as well as data for prior years. Earnings, essentially, are how much money a company made or lost during a quarter.

Here are some key components in an earnings report:

Revenue, or sales: Generally speaking, this is income that a business has from its normal business activities, usually from the sale of goods and services to customers.

Net income: This is how much profit a company has made after paying its expenses, debt payments, and taxes, among other things. You can think of it as similar to the cash you have left over after you’ve paid all your expenses for the month.

Generally, companies with profits are successful at doing what they do. Companies that have no profit, or that lose money, are less successful. Exceptions to this rule include startups, or companies in some high-growth sectors, which often need to spend at rapid rates to continue growing and innovating. It may surprise you to learn that Amazon is rarely profitable, yet it is one of the biggest companies around.

Earnings per share, or EPS:  This is a somewhat complicated equation that breaks down profit according to the number of shares a company has made available for sale to the public. If a company’s EPS increases from one quarter to another, it’s a gauge of profitability, and how much money a company has to invest in its ongoing operations.

Other information: Companies may use a quarterly earnings report to talk about executive changes–for example when an officer of the company moves to a new position or leaves. It may also use a quarterly report to talk about any risks it sees in the foreseeable future, such as  from competing businesses, changes to the market where it operates, or from changing customer sentiment.

Why do investors care about earnings reports?

Investors care about earnings because they provide a snapshot of a how a company they’ve invested in–or may want to invest in–is performing. Think of an earnings report as a general health assessment for a company.

The post How To Read an Earnings Report appeared first on Stash Learn.

On Friday, the NASDAQ, the largest index of publicly traded technology stocks in the U.S., shed about $100 billion. Until that point, the tech sector had been up about 17% for the year.

It’s a reminder, experts say, that tech stocks can be volatile, or subject to big swings in their share prices. That’s why it’s a good idea to diversify, and invest in a variety of industries, geographical regions, and categories of businesses. That way your portfolio won’t take as big a hit when a sector has losses.

What the tech sell-off means

Here’s a closer look at what happened last week:

Just five companies caused the big swing, according to Bloomberg. Those stocks are Apple, Microsoft, Alphabet, Amazon and Facebook.

They account for 30% of total weighting of the NASDAQ index. Over the last few days, they were responsible for 75% of the index swing, according to reports.

The biggest loser was Apple, whose stock had fallen by 6.2% percent by Monday, shedding $50 billion of value on concerns about iPhone sales. Google’s parent company Alphabet lost about 4% of its stock value, and $30 billion worth of market cap, and Microsoft lost 3%, or about $17 billion of market cap over the same time period.  

Since Monday, the NASDAQ has begun edging up again to regain some of its losses.

Nevertheless, the selloff is a sign that investors are shifting their cash around, moving into stocks that may be undervalued, such as financial and energy, some experts say.  

The post Tech Sell-Off: A Great Lesson On Why Diversification Is Important appeared first on Stash Learn.