In your company’s growth story, consider quarterly growth the first sound
bite. You can obtain data for the latest quarter—and indeed the last four
quarters—from your financial website of choice. Ultimately, the goal here is
to calculate year-over-year growth rates, and you won’t find the older
material in the same place you found more recent numbers. Now it’s time to
visit the company’s website to pull the rest of the data.
Start with the earnings release for the quarter a year before the latest
one. Read the release from the top until the company tells you how much it
earned in the quarter. Here you must be careful, because the first number
you read may not be the one you need. Don’t just grab the release for the
previous quarter. Comparing June-quarter earnings to March-quarter
earnings may be beneficial, but many companies operate seasonal
businesses. Year-over-year comparisons (quarter ended June 2013 versus
quarter ended June 2012) generally provide greater insight into growth
patterns. See “To Everything There Is a Season” for more on the importance
of comparing quarters year-to-year.
To Everything There Is a Season
Why is it so important to measure a company’s growth relative to the
same period a year earlier? Because many businesses see their revenue
rise and fall in patterns within the year. If you simply compare the most
recent quarter to the one three months ago, you might mess up your
growth analysis.
For example, many natural-gas utilities earn a nice profit in the
December and March quarters, but routinely lose money in the June and
September quarters when the weather is warmer and few customers
heat their homes. Additionally, most retailers generate stronger sales
during the holiday season than they do for the rest of the year. Per-share
profits earned by the department store chain Macy’s illustrate this
seasonality.
Table 5.2 – Macy’s Per-Share Profits for Fiscal Year
Table 5.2 – Macy’s Per-Share Profits for Fiscal Year
In each of the last three fiscal years, Macy’s earned more in the January
quarter than it did in the previous three quarters combined. If you
compared Macy’s April-quarter results to results from the January
quarter, which includes Thanksgiving, Christmas, and the post-holiday
period, you’d almost definitely see declining profits. But because of the
seasonality of Macy’s business, that decline won’t tell you much in terms
of the overall health of the company and the value of the stock. It is much
better to compare the April-quarter numbers to the April quarter of the
previous year.
Collecting Relevant Data.
