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It’s earnings season for major corporations — and as they report their earnings per share, they also may share some information that is useful to candidates who are being recruited to join their staffs.Yet the information that’s important to potential hires may not show up on CNBC or in wire service reports on earnings for General Electric or JCPenney. You may need to dig it out of a Securities and Exchange Commission filing or tease out in a spreadsheet, or read analysts’ reports on the company’s business strategy.
If this sounds like a lot of work, it is. Yet you’re considering whether to invest far more than your money in shares. You may invest your career, your brand, your reputation and your future financial prospects if you join their team.
As a former business editor, I have read hundreds of public companies’ quarterly reports, and know the importance of pulling up a few different financial reports and looking at the trends in profit margins and total U.S. staff size (usually found in the 10-K annual report).
You also need to look into the future and try to evaluate whether the company can keep its dominant role and its strong growth, said Sheraz Mian, director of research for Zacks Investment Research in Chicago. So grab your calculator and get ready to dig into the company’s past performance and future possibilities, with these four strategies:
1. Get past the headline.
Read the earnings statement all the way through, and then dig up a handful of 10-Q quarterly report on the SEC’s website. You want to consider three to five year trends on revenue or sales figures, and operating profit margins, said Mian, whose background is in research for investors.
“You want to get a feel for if the company is able to increase its revenue,” he said.
Now peer into the future. Public companies often give “guidance” on how their sales and profit margins will be for this year, and sometimes beyond. Pull that up. You also may want to see what a leading analyst (from Zack’s or another organisation) is anticipating.
2. Read up on the risks.
In the 10-K annual report, companies are required to list the risk factors they face. Often this is presented in legalese, but it still can be worthwhile to review, said Mian. Pay attention to large levels of debt maturing in a short time frame, especially if the company is growing and may need to borrow some more money. Check out key competitors. One risk that probably won’t be mentioned is an acquisition by a larger company, or peer companies that are No. 3 or less in market share are more likely to be gobbled up, said Mian, as are companies owned by an older owner or someone “who has nothing else to prove.”
3. Check the comments.
You want to hear what’s happening unfiltered by management. So read what workers are saying on Glassdoor, as well as on other independent message boards or on LinkedIn alumni groups for the company. Sometimes rumours run rampant, and may not be true. But often there’s a speck of truth amid all the chatter that could indicate big growth or big problems ahead. The trick is to read a variety of these comments, maybe ask a question or two, then compare them to media accounts and the numbers you’ve been gathering on the company’s financial standing.
4. See how it measures up to its peers.
You want to see if it is gaining market share or losing it, if it has more cachet or less than its competitors and more. This may not be so easy if the company is small or privately held, but it’s worth the effort to try. Sometimes you can do this informally by talking to a supplier that works with all the players, a friend who recently moved from the competition to the company you’re targeting. Or you can review the financial documents of its two largest rivals. If they are in an industry that is not growing much, one company’s growth is almost always at the expense of another, said Mian.
You don’t need to be a CFO or an analyst to do this kind of due diligence, but you do need to invest a few hours time and attention to this. The payoff will be when you join a company with healthy prospects and enough growth that it can pay you a bonus after you’ve exceeded your goals.
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