Jonathan M. answered • 03/28/20
College/HS Tutor Specialized in All Things Business & Writing
Alex,
That is a great question! Changes in share prices can be an enigma to even the best investors. In regards to your question, earnings may not be the most relevant indicator of changes in share price because they do not tell the whole story. As investors, we are looking for GROWTH. We buy into a company and expect the company to improve their sales, customer base, product lines, and much more. A company who is very profitable and has great revenue figures may be a successful company, but investors will only realize a profit when a company expands in a way that the market is not expecting.
For example, in 2019 Walmart did $519 billion in revenue making it the largest company by sales in the world! Although, in 2018 Walmart did $500 billion in revenue; so their increase in sales was modest, not spectacular, meaning their sales price may not increase much. On the other hand, a very small company that blows up in popularity but only does a few billion dollars in sales will cause massive gains for its investors.
Moving on, the annual report is the comprehensive report of a company containing all relevant information on the company's preceding fiscal year. Since the information provided is based on the preceding year, it confirms to the investor any concerns or questions that the investor may have had about performance. I hope this helps, feel free to reach out if you have any follow-up questions. :)
