1) Averaging the last 3 or 4 beats from a percentage standpoint (default to making it a tick smaller because beats tend to shrink as the numbers get larger).
2) Making sure QoQ growth using the estimate makes sense looking at prior years (again, default a tick smaller).
3) Checking that the raw dollar add looks reasonable given the recent trend (depending on seasonality, the raw add each Q should creep upward over time).
There's a little art to it in tinkering with the numbers within a couple million until you find the combo of beat, QoQ, and raw add that makes the most sense. It's not perfect, but having done it a couple years now it does seem to match fairly well with the range the market is looking for as well (at least based on after hours reactions).
Thanks, I arrived at the same Rev beat number as you for $ZS, ($321m) using an avg beat of last 4qs of 5% (tick down). With $321m gives us 12% QoQ growth(flat with previous qtr, acceptable) and raw adds$ increasing a bit seq which is ok.
Hi Stock Novice. I know AYX is one of your largest holdings, it is my largest as well but only at 9% of my portfolio as mine is less concentrated. They reported earnings yesterday as I am sure you saw, and was curious what you were forecasting for rev? I used the same kind of method as you described above and therefore set the bar at a beat of roughly 6% to put revenue at ~$115M and growth just over 50% YoY. They had beat earnings by greater than 6% in each report since 2017 so I felt I was setting the bar low in light of COVID. I was pretty surprised to see revenue come in under $110M and growth to hit the brakes from 75% to 43%. I guess I misjudged the virus' effect on the co. Anyway, I am sure you will write your thoughts in your May review but just figured I would comment here as I saw you mention you hope people comment and share thoughts. I have no intentions of selling as I still believe in the long-term thesis, and would be happy to add if we see the $80's again but I am eager to get your thoughts on the Q! Thanks, Rex
Hi Rex - I appreciate the comment. I thought similarly and was carrying $116. They had beaten by a much larger percentage than that the prior two quarters, but I thought 6% more reasonable considering their entire history. The fact this Q's dollar and percentage beats were both their smallest ever suggests to me management was very much caught by surprise with the abruptness of the slowdown. I had a little different reaction than you post-earnings given my larger allocation. While I still believe in the business, I was uncomfortable with 18% of my port in a firm clearly pressing pause to survey the landscape. I sold about 60% of my shares after hours to cut my allocation to ~7% and will adjust from there after ROKU, NET and TTD report today.
Thanks for the quick reply. I agree with that, things must have gotten very ugly those last few weeks of March. It appears AYX is headed for choppy waters, makes sense to look for a safer place in this COVID storm with a bit clearer outlook. Thanks again and all the best on deciding where to reallocate! Look forward to reading about it next month.
How did you got your estimate of $152-155? Using avg of previous beats?
There are more examples in this article if you're interested: https://thestocknovice.substack.com/p/preparing-for-earnings-reports
Kind of. It's usually some combo of:
1) Averaging the last 3 or 4 beats from a percentage standpoint (default to making it a tick smaller because beats tend to shrink as the numbers get larger).
2) Making sure QoQ growth using the estimate makes sense looking at prior years (again, default a tick smaller).
3) Checking that the raw dollar add looks reasonable given the recent trend (depending on seasonality, the raw add each Q should creep upward over time).
There's a little art to it in tinkering with the numbers within a couple million until you find the combo of beat, QoQ, and raw add that makes the most sense. It's not perfect, but having done it a couple years now it does seem to match fairly well with the range the market is looking for as well (at least based on after hours reactions).
Thanks, I arrived at the same Rev beat number as you for $ZS, ($321m) using an avg beat of last 4qs of 5% (tick down). With $321m gives us 12% QoQ growth(flat with previous qtr, acceptable) and raw adds$ increasing a bit seq which is ok.
Hi Stock Novice. I know AYX is one of your largest holdings, it is my largest as well but only at 9% of my portfolio as mine is less concentrated. They reported earnings yesterday as I am sure you saw, and was curious what you were forecasting for rev? I used the same kind of method as you described above and therefore set the bar at a beat of roughly 6% to put revenue at ~$115M and growth just over 50% YoY. They had beat earnings by greater than 6% in each report since 2017 so I felt I was setting the bar low in light of COVID. I was pretty surprised to see revenue come in under $110M and growth to hit the brakes from 75% to 43%. I guess I misjudged the virus' effect on the co. Anyway, I am sure you will write your thoughts in your May review but just figured I would comment here as I saw you mention you hope people comment and share thoughts. I have no intentions of selling as I still believe in the long-term thesis, and would be happy to add if we see the $80's again but I am eager to get your thoughts on the Q! Thanks, Rex
Hi Rex - I appreciate the comment. I thought similarly and was carrying $116. They had beaten by a much larger percentage than that the prior two quarters, but I thought 6% more reasonable considering their entire history. The fact this Q's dollar and percentage beats were both their smallest ever suggests to me management was very much caught by surprise with the abruptness of the slowdown. I had a little different reaction than you post-earnings given my larger allocation. While I still believe in the business, I was uncomfortable with 18% of my port in a firm clearly pressing pause to survey the landscape. I sold about 60% of my shares after hours to cut my allocation to ~7% and will adjust from there after ROKU, NET and TTD report today.
Thanks for the quick reply. I agree with that, things must have gotten very ugly those last few weeks of March. It appears AYX is headed for choppy waters, makes sense to look for a safer place in this COVID storm with a bit clearer outlook. Thanks again and all the best on deciding where to reallocate! Look forward to reading about it next month.