A Technical Approach To Trend Analysis: Practical Trade Timing for Enhanced Profits

Revenue and Earnings

The study of revenue and earnings, perhaps more than any other fundamental indicators, defines fundamental volatility. In a low-volatility company, three attributes are expected: consistently rising revenue, consistently rising profits, and level or increasing net return.

The combination of all three of these features is essential in order to understand the health of a company’s fundamentals. When revenue and earnings are declining and even moving into the range of net losses, the trends clearly are negative. However, a hidden negative pattern may also be found. This occurs when revenues are on the rise and earnings are flat or declining. At the same time, net return is falling. This means that earnings reflect a growing ...