Smart Investing
The difference between passing grades and failing grades has been so significant over the past 20 years, why would you ever choose a stock without at least checking it first?
Measuring the quality of earnings relative to investor expectations creates a superior measure of the Post-earnings Announcement Drift (PEAD) and, quite simply, those companies with favorable earnings and low expectations consistently outperform the market. ... and those with high expectations and weaker results don't.
From December 17, 2002 until November 7, 2024, the date of the last graded earnings release that has completed a quarter, we have graded 169,354 earnings releases. If you had randomly bought any of them at the open after their earnings release and held until the open following their next earnings release, you would have averaged 2.3% for the 13-week period. During the same period, there were 52,039 that we graded a D+ or lower and they averaged a decline of 0.3% for the quarter. On the other hand, there were 59,680 with an Earnings Whisper Grade of B- or higher, and they averaged a 4.9% quarterly gain.