Not all good news is created equal. Sometimes, what seems like good news is just a candy coating around something that is actually much more bitter. The trick is to spot the real reasons to rejoice from the news that serves little purpose but to add some froth to a slow news day. (Wanna get started investing? Check out our Investopedia Stock Simulator and hone your skills risk free!)
Record Earnings
"Today, we at XYZ Corporation are pleased to announce record earnings for the second quarter!"
Notice that corporate announcements of "record earnings" almost never put them into context. If the prior record was achieved ten years ago, how much should long-suffering shareholders celebrate? Likewise, if the company's ROIC is in the low single digits, there would not seem to be any immediate cause for dancing in the streets because better management could do more with those same assets. Companies also do not generally talk about what sorts of maneuvers go into their calculations, and there is no shortage of tricks, gimmicks and shortcuts that motivated managers can use to goose the numbers a little higher (often at the expense of future results). (For more, check out 5 Tricks Companies Use During Earnings Season.)
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