Growth Investing

Earnings drive stock prices-but looking only at the headline numbers can give a misleading picture. This article walks through five key steps to go deeper, including checking for accounting changes, evaluating management commentary, and reviewing analyst revisions and guidance. 

Do you think most investors dig deep enough into earnings reports-or are markets too easily swayed by surface-level EPS beats or misses?

Let's discuss. If you haven't read it yet, the article offers a great reminder of why context matters: How to Analyze Corporate Earnings in Five Steps (July 2025, Charles Rotblut).

My response to Charles' article.

=====================================================================================

I have a confession. 

#1 I, like many AAII members, learn a lot from the educational materials you, the AAII staff, and guest authors publish to help us LEARN how to be more educated investors.

#2 The article, "How to Analyze Corporate Earnings in Five Steps," is a good example of how you distill and share your wisdom with us.

#3 Contemporaneously, Wayne published "Using Large Language Models for Stock Valuation Analysis," providing a similar "DIY" method to estimate the discounted net present value of cash flows to evaluate the value of a stock.

#4The AAII financial statement analysis series provides 15-20 more educational opportunities to LEARN how to become more educated investors.

My confession is that I am becoming a lazy, spoiled AAII member who would prefer to have a non-human "Charles bot" or "Wayne bot" to do my homework for me.

How can I expect to get an "A" on the final exam (investing real money in real markets) when a "bot" does my homework? 

For a much more disturbing issue related to using "bots" to do research, see my comment on what the Microsoft bot says when I asked the question, 

"How stable is the US political system?" 

#5 For the sins of laziness and sloth, I am ashamed.

#6 My solace is in the legend of John Henry, the "steel-driving man" in American folklore, who was tasked to outperform a technologically superior steam-powered drilling machine in digging holes for explosives to blast the rock in constructing a railroad tunnel.

In this classic American blues folksong, John Henry dies in this "man vs technology" duel.

I am not as capable as John Henry, you, Wayne, or any of the LLM chatbots.

#7 I already have access to several financial analyses from well-known analyst organizations. They are legion, rarely agree, and always have disclaimers about their offerings.

#8 Perhaps that is the niche AAII can exploit to compete with these new ersatz Charles or Wayne robots. But I feel as inadequate as John Henry when you don't inculcate the education you try to drive into my brain.

#9 Robert Johnson's legend claims he made a deal with the devil in exchange for exceptional musical talent.

Robert encountered the Devil at a crossroads, claimed to be the intersection of Highways 61 and 49 in Clarksdale, Mississippi, where the Devil tuned his guitar, granting Robert the ability to play with supernatural skill.

#10 Cue Big Bill Broonzy, Lead Belly, or Josh White.

I think most investors get too caught up in quarterly earnings reports. To reuse one of my favorite analogies, it's like looking at a snapshot from a decades-long video. It may be important if it turns out to be a sea-change moment, but usually in the whole scope of the video, it isn't.

Of course, I'm one of those crusty old dinosaurs who thinks equities are best held for decades at a time.