What to look for in an earnings play | stockbee

7/09/2014

What to look for in an earnings play

The earnings season has started and you will see many companies releasing earnings. many will beat earnings . That is the game companies have skillfully mastered over the years. Some will miss. Some will go up 20 to 40% in few days post earnings.

Those are small moves.  More suitable for swing trades.

But then there are explosive moves like BOOM which can make your year...


If you see this stock pre earnings it had no liquidity, no analyst coverage , and no meaningful % gain in 8 to 10 years prior to breakout.


And then it announced earnings and they were blowout :

DYNAMIC MATERIALS REPORTS THIRD QUARTER 2004 FINANCIAL RESULTS
(Boulder, CO - November 11, 2004) Dynamic Materials Corporation, (Nasdaq: BOOM), "DMC", today reported third quarter income from continuing operations of $1,135,275, or $.22 per diluted share, versus income from continuing operations of $358,568, or $.07 per diluted share, for the third quarter of 2003. DMC's third quarter 2004 sales were $12,070,114, a 24% increase from third quarter 2003 sales of $9,724,125. For the nine months ended September 30, 2004, DMC reported income from continuing operations of $2,106,667, or $.41 per diluted share, versus income from continuing operations of $1,367,312, or $.27 per diluted share, for the first nine months of 2003. Reported sales for the first nine months of 2004 increased by 27% to $34,215,328 from $26,930,181 for the comparable period of 2003.
For the three months ended September 30, 2004, DMC reported net income of $833,902, or $.16 per diluted share, compared to a net loss of $679,393, or $.13 per diluted share, for the third quarter of 2003. For the nine months ended September 30, 2004, DMC reported net income of $537,130, or $.10 per diluted share, versus a net loss $130,281, or $.03 per diluted share, for the first nine months of 2003. Reported net income for the three and nine months ended September 30, 2004 reflects the negative effect of a loss from discontinued operations of $301,373, or $.06 per diluted share, and $1,569,537, or $.31 per diluted share, respectively, including operating losses of $133,373 and $782,537 for the respective periods and a $787,000 loss for the nine-month period relating to the previously announced divestiture of the Company's Spin Forge Division under a transaction that closed on September 17, 2004. The net loss for the three and nine months ended September 30, 2003 included losses from discontinued operations of $1,037,961, or $.20 per diluted share, and $1,497,593, or $.30 per diluted share, respectively, relating to the combined 2003 operating losses of Spin Forge and the former Precision Machined Products ("PMP") division, which was sold on October 7, 2003, and a loss on the sale of PMP in the amount of $710,309 that was recorded in the third quarter of 2003
Once you see earnings growth like that in neglected stock like this you don't have to be Einstein to figure out what is going to happen. The stock will triple or more. 
Eventually this stock went all the way up to 45 or so in a year after this first earnings acceleration. 
These are the kind of opportunities to focus on during earnings season. For that you have to find out which companies are releasing earnings before open or after hours and then look at the outliner in earnings or sales growth on extremely neglected stocks. 
You just need one or two trades like this in an earnings season to make your year or change your financial situation forever. And all it takes to find these stocks is 15 minutes of systematic work of going through earnings and stock that gap up after hours or pre market. 
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