In the calculations of equities traders, probably no measure of corporate performance garners more attention than companies' success or failure in meeting the earnings forecasts of analysts.
Yet, important though earnings results are to investors, they are hardly foolproof guides to stock performance on a reporting day.
Many are the occasions where companies report meeting or beating earnings forecasts only to see their stocks decline because an achievement in earnings is countered by disappointing revenues.
Just how much weight do investors assign to revenues as distinct from earnings? New research in the June issue of Accounting Horizons, a journal of the American Accounting Association, finds this answer to vary considerably among five major business sectors and to depend as well on the stage of a company's life cycle.
Read the CPA Practice Advisor story here.