There are danger signs to watch for in trading statements which may be issued separately or alongside a company’s results.
If you are superstitious and believe that bad news always comes in threes then you will feel at home with profit warnings. When things go wrong, it is rare for them to be sorted out in one go. Three profit warnings is the norm, though there can be more.
Note that directors can be as reluctant as investors to face up to the fact that they got it wrong. Being human, they do not go out of their way to highlight the problems. Events at The Game Group, Europe’s biggest computer games retailer, provide a classic case.
Case study: Game Group
Warning signs emerged in April 2011 when disappointing ...