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Financial results: what are they?
Financial results: what are they?
21 February 2023#Private Banking

Financial results: what are they?

Every year there are recurring events that the financial community awaits with great interest.
We are talking about the so-called results, let's find out together what they are!

Cyclically, most listed companies have to deal with their financial results, i.e. the publication of their earnings reports detailing items such as net profit, EBITDA, operating profit, margins and more, aimed at giving all stakeholders an indication of the company's performance during the year. Specifically, the market disclosure obligation is quarterly, and there are therefore four 'earnings seasons' where companies are obliged to present their earnings:

  • The quarterly where the financial statements for the first three months of the year are presented
  • The half-yearly where the second quarter of the year is presented
  • The nine-monthly where the financial statements for the third quarter of the year are presented
  • The annual results for the fourth quarter of the year, but it is often also a time for summarising the overall performance for the financial year

Intra-annual reports in Italy are simply known as quarterly reports and are generally published in the months following the end of the quarter: Consob also provides a calendar of issuers who are subject to periodic disclosure obligations.

These are 'crucial' times not only for companies that have to provide information on the quarter's earnings, earnings per share, operating profit and other indicators describing the company's health and growth prospects, but also for investors precisely because the equities linked to the companies presenting the data risk becoming volatile both negatively and positively. Furthermore, on the day companies present their financial results to the market, there is usually an earnings call or earnings announcement, i.e. a conference where the company's management - often the CEO - presents the outcome of the earnings report to analysts, traders and the media. This is the event during which any questions or clarifications on the main details of the reports are asked. Not to be forgotten, the publication of results is a real legal requirement: that is why at the beginning of the year, listed companies are obliged to file their economic calendar for transparency and uniformity of information to the financial community.

Analysts' opinions on the target price

Once the results are announced, analysts make judgements about the company's stock and its general performance by estimating the price it could reach. These can be of three types:

  • Sell: the suggestion is to sell the stock as it is underperform
  • Hold: the suggestion is to keep it in the portfolio because it is neutral/market perform
  • Buy: the share is outperform, according to brokers there will be a possible price increase of more than 15% in the next six months. Therefore, the rating is buy.

Glossary: the key words

But basically, what are the main figures that can be read in financial reports?

  • Net profit is the profit that is made by a company and is used to assess its profitability in a given period. It is used to calculate the earnings per share (EPS) of the company.
  • Ebitda stands for Earnings Before Interests Taxes Depreciation and Amortisation and is an indicator that helps us assess a company's profit, excluding taxes, depreciation, amortisation and interest. It is an indicator used to assess a company's profit-making capacity.
  • Net interest income: is the difference between income from lending (interest income) and investments (dividends) and the cost of funding (interest expense); it is an index representing the profitability of the bank's core operating lending activities.

For financial institutions such as Banca Generali, it is also important:

  • Deposits: the sum of ordinary deposits from customers and those represented by securities.
  • AuM (assets under management): is the volume of assets under management, including mutual funds, fund-based or securities portfolio management, insurance savings and assets under administration. In the case of Banca Generali, the value of assets under management refers to the assets managed through the company's financial adviser networks.