How to read a quarterly result without an accounting degree

When results appear, and where

Under SEBI listing rules, every listed company must publish its financial results on a fixed schedule. There is no guessing involved.

Quarterly results get 45 days. The final quarter gets 60 days, because those numbers are fully audited rather than subject to a lighter limited review.

You will find them free on the NSE and BSE websites under the company name, and in the investor relations section of the company own site. There is no need to pay anyone for access to this.

The four lines that matter

A results statement runs to many rows. As a beginner you can safely ignore most of them and read four, in this order.

1. Revenue from operations

This is total sales, before any costs. It answers whether the business is selling more. Growth here is the raw material for everything else. A company whose revenue has been flat for three years is not going to produce sustained profit growth by cost cutting forever.

2. Operating profit and margin

Operating profit is what remains after the costs of actually running the business, before interest and tax. The operating margin is that as a percentage of revenue.

This is the most informative single number on the page. Revenue can be bought by cutting prices. Margin tells you whether the company had to give away value to get that revenue. Rising revenue with falling margin often means competition is intensifying.

3. Net profit

What is left after interest, depreciation and tax. It is the number every headline quotes and it is the most easily distorted, because one-off items land here: selling a building, a tax refund, a legal settlement, writing off a subsidiary.

Always ask whether the change came from the business or from an event. A company whose profit doubled because it sold a factory did not become twice as good at its job.

4. Debt and interest cost

Look at borrowings on the balance sheet and the finance cost line. Debt growing faster than profit is the pattern behind most company failures. Rising interest cost with flat profit means an increasing share of what the business earns is going to lenders rather than owners.

Comparing correctly

This is where most beginners go wrong, and it is easy to fix.

Compare each quarter against the same quarter last year, which is called year on year. Do not compare against the previous quarter unless you know the business is not seasonal.

Plenty of Indian businesses are strongly seasonal. Consumer companies sell more around festivals. Agricultural inputs follow the monsoon. Air conditioner makers have an obvious summer. Comparing the December quarter with the September quarter in such a business tells you about the calendar, not the company.

Then extend the view. One quarter is almost meaningless. Line up the last eight quarters of revenue, margin and profit and look at the shape. Steady, improving, deteriorating, or erratic. That shape is the actual information.

What to look for beyond the numbers

A few things that are easy to check and disproportionately useful.

• Profit rising while cash from operations falls. Profit is an accounting judgement, cash is a fact. When they diverge for more than a quarter or two, something needs explaining. See the cash flow statement.
• Receivables growing much faster than revenue. It means sales are being recorded but customers are not paying. Sometimes a timing issue, sometimes a sign that sales are being pushed to distributors who cannot sell them on.
• A change in the auditor, or a qualified opinion. An auditor report that is anything other than clean deserves your full attention.
• Rising promoter pledge. Disclosed in the shareholding pattern. A high or rising pledge is one of the clearest warning signs in Indian markets.
• Large one-off items appearing repeatedly. An exceptional item every quarter is not exceptional. It is the business.

Why the price moves the way it does

A company reports 20% profit growth and the share falls 8%. This confuses people constantly, and the explanation is simple.

The price already reflects what people expected. If the market expected 30% and the company delivered 20%, the result is good and the surprise is bad. The share price responds to the gap between expectation and outcome, not to the outcome itself.

This matters for how you use results. If you are trying to predict the next few days of price movement, you are competing with people who model expectations professionally, and you will usually lose.

If instead you are asking whether the reason you own this business still holds, results are exactly the right document, and the share price reaction in the following week is close to irrelevant. That is the use this site is built around.