Reasons Why I Stop Playing Earnings Gaps Part 2

So is it possible for one tell if a company's actual earnings will beat analysts’ earnings forecast, before the actual earnings result is announced publicly? Allow me to just share some techniques that people that I came across use to try to predict earnings:

• Estimate the earnings-per-share (EPS) figure from the number of products the company has sold. For instance, there are people who try to correlate past sales figures with historical EPS and predict what the next EPS could be. Or if you find that a particular product is always out-of-stock, good chance that its sales is unexceptionally good, chances of the company beat earnings is higher.


• Look out for unexpected spending during the quarter. For example, unexpected court cases, fines, hefty advertising charges etc. These tend to make the company not being able to meet earnings forecasts.


• Look out for companies whose insiders are buying their own company stocks some time before earnings announcements.

I believe one has to be very familiar with the business that the company is in and has to follow the company news very closely in order to guess if the earnings will beat forecast. Frankly speaking, so far I have not came across anyone that has managed to guess correctly consistently.

So if the actual earnings beat earnings forecast, does it mean the stock price will definitely gap up?...