How to read company results without running for the hills

Earnings season can rattle even seasoned investors. Here's how to read the numbers calmly and spot the actual red flags. By Neesa Moodley

- Neesa Moodley

Investing is not recommended as a do-it-yourself game and you should always seek proper financial advice, but you can also arm yourself with basic knowledge so that you can make informed choices.

Wendy Myers, head of securities at PGS Wealth, says understanding key financial metrics means you are better able to figure out how a company is performing financially. And if you review these metrics across a sector, you can also use the information to spot high-level, long-term trends rather than getting bogged down in intricate financial details.

"An earnings release shouldn't trigger knee-jerk investment reactions. It is important to remember that there are many macroeconomic factors at play that impact the share price, but they have nothing to do with how a stock is intrinsically performing in its sector," she says.

Warren Buffett famously said: "If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes." This buy-and-hold philosophy underpins the theory of long-term investing, emphasising that you need to be comfortable holding a stock through market cycles and not only for short-term gains.