Many companies have announces their Quarterly Results for the Q4FY21 between April-May. Surprisingly, many good companies have posted bad results for the quarter ended 31st March 2021. So, what are bad results, and how does Investor should react to the same. Let’s read it out:
What are Bad Results:
Bad Results of the company’s stock can be classified into 2 types:
i) The First kind of bad results are When Results of the company stock do not match with the estimates of the Market Experts, Analysts, etc., and accordingly market respond to the results as bad results. Its impact is for a short period.
ii) Secondly when Company posts bad financial results wherein the profit and other figures are down sequentially or yearly.
What Should Long-Term Shareholders do?
- Firstly, if there is no problem regarding the fundamentals of the company, then it can be an opportunity for the long-term investor to pick the particular stock at the dip due to the announcement of bad results of the company. One should keep in mind that Earnings Visibility or growth visibility should not hamper the profit of the company in the future due to the poor performance of the company in a particular quarter of the year.
- Investor’s conviction towards the particular sector. For example, Assume if Natural Gas Sector may grow at the rate of 12%-15%, wherein if any company in the sector can outperform the sector then Sector Dynamics also comes into consideration for the investor.
- An investor should also look at the financials of the company carefully. If there is strong financials are strong for the company, Investors need not to concern about bad quarterly results.
- Lastly, if there is no issue regarding the Corporate Governance of the company, Investors should not worry about bad quarterly results.
Stocks to Watch:
- This stock witnessed the impact of the first kind of bad results where the results of the company didn’t live up to the expectations of market experts, analysts, etc. and hence stock price was punished.
- But now, it seems that the Market has overcome this impact, and stock price is recovering.
- One should not only react to a poor business figure on a quarterly or yearly basis but should look for the reasons behind the same.
ii) HCL Tech:
- In the case of Infosys also, there were no overall changes in corporate governance.
- The only thing that happened in the company in FY21 was the rewarding Milestone Bonus to Employees for reaching out the mark of $10 billion, which impacted their profitability in their quarterly result.
iii) Indiamart Intermesh:
- The company witnessed a YoY fall in its Quarterly Results.
- This stock witness a kind of re-rating in stock due to a bad quarterly performance earlier was trading at a premium valuation.
A Long-Term Investor should look carefully mainly at the Fundamentals, Sector View, Financials, and Corporate Governance of the company before investing in it. Further, one should not react based on one-two poor quarterly results but should try to find out the reasons behind bad performance in the particular quarter, and if it seems genuine, then should stay invested. The stocks recommended above are not direct suggestions and one should do proper research and study from his side too.