To use valuation methods like fundamental analysis and perform calculations like key financial ratios, you need information from which to work: numbers, facts, data. And not your own assumptions or estimations (even if you’re one of the most savvy, experienced investors), but actual information from the company itself.
The primary sources of that information: earnings calls and quarterly and annual reports.
These company documents contain the from-the-source details you need to make sure that your evaluations are as accurate as possible, so that you can feel as confident as possible in your investment decisions.
Accessing earnings calls and reports is easy. Understanding what they contain and knowing how to mine them for useful insights takes practice.
Quarterly and annual reports: what they include and how to analyze them
If a company trades on a Canadian exchange, whether the company itself is Canadian or foreign, it has to file publicly accessible quarterly and annual reports so that investors can see how the business is doing. In the U.S., companies publish very similar filings called the 10-Q (quarterly) and 10-K (annual).
There’s not one single report template to rule them all, but they do adhere to a pretty standard structure, since regulators require specific information.
Quarterly reports: Focus on the most recent three-month period and include basic financial statements, plus a management discussion and analysis (MD&A), where management explains what happened and why.
Annual reports: They include more detail and usually come with an annual information form (AIF), which is basically an overview of the company’s business, risks, and strategy. They’re also audited by a neutral third party, meaning someone else has signed off on the numbers.
These documents are the “official record” that earnings calls (we’ll dig into those next) build on. Before you listen to management talk about the quarter, these reports give you the actual numbers and a clear starting point for your analysis.
Most companies publish their reports on their website, within an investor relations section. Canadian investors can also find the reports on SEDAR+ (System for Electronic Document and Analysis Retrieval), which stores all Canadian regulatory filings. The equivalent for American regulatory filings is EDGAR (Electronic Data Gathering, Analysis, and Retrieval).
What quarterly and annual reports include
Quarterly and annual reports have several key sections that tell you what happened in the business and why.
Financial statements
These are the core of the reports, and they usually come in three parts:
Income statement, which shows profits and losses
Balance sheet, which shows assets and debts
Cash-flow statement, which shows the actual movement of cash
Together, these statements can signal whether the company is growing, profitable, and financially healthy.
MD&A
This is where management provides an explanation for the company’s results. It helps put the numbers in context by explaining what drove any growth, what challenges the company faced, and what changed from the previous quarter or year.
Segment breakdowns
Some reports will include segment breakdowns, which show how different parts of the business performed. It’s helpful for zeroing in on which company divisions, products, or regions are driving results.
Risk disclosures
Annual reports (and sometimes quarterly reports) also include risk disclosures, which outline the major risks the company faces. These could be risks of increasing competition, regulation that’s adding pressure, or supply chain issues. In Canadian reports, they’re usually found in the MD&A or in the AIF. In the U.S., risk disclosures are featured prominently in annual reports.
Footnotes
Reports will include footnotes that provide any necessary context for numbers, like which accounting methods were used, if a cost was a one-time item, or whether any fluctuations are unusual. If something in the financial statements jumps out as being unusual, look to the footnotes for an explanation.
What to focus on
If you’re new to reading quarterly and annual reports, they can look overwhelming. Deep breaths. The key is to know what to pay close attention to.
Revenue growth vs. profit growth. A company might be growing sales but still struggling to rake in a profit, so it’s important to look at both numbers.
Cash flow vs. net income. Net income can be influenced by accounting rules, but cash flow shows the actual money coming in and out of the company. A strong cash flow is usually a more reliable sign of financial health.
Gross margin and operating margin trends. Gross margin shows what revenue is left after accounting for the direct costs of production (like raw materials and labour). Operating margin looks more broadly at operational costs. It’s the revenue a company retains after expenses like marketing, overhead, research and development, administrative costs, and non-cash expenses like depreciation and amortization. Both margins are helpful, but operating margin is a better measure of how efficiently a company can turn sales into profit.
Balance sheet strength. Look at the company’s debt levels and liquidity. A company with too much debt or too little cash could be vulnerable if the business hits a rough patch. A strong balance sheet gives management flexibility.
Capital allocation. How is the company allocating cash to buybacks, dividends, and capital expenditures (investments in growth)? Strong companies invest enough in growth to stay competitive and pay dividends to shareholders without stretching their financial position.
Management outlook. Pay attention to the parts of the MD&A where management talks about expectations, guidance, or projections for future performance. This could include things like growth, costs, or major initiatives. Does the tone feel cautious, or overly optimistic? Are there risks that are mentioned more than once, or that seem to have urgency? Compare the guidance to past results and forward-looking statements to gauge how realistic and reliable the company’s forecasts are.
Understanding earnings calls and their components
Earnings calls are regularly scheduled conference calls or webcasts for public companies to discuss their latest financial results with their investors and shareholders, as well as analysts and media. They usually follow the release of the company’s latest quarterly or annual report.
Hot tip: review the report before the earnings call so you’re familiar with the numbers. Reports give you the facts; calls give you the context. Inconsistencies between what the report says and what company leadership says during an earnings call can be a red flag.
Key participants on an earnings call
Here’s who you can expect to hear from on an earnings call:
The chief executive officer (CEO). They’ll set the tone for the call, highlighting the big-picture results and talking about the company’s high-level strategy and vision.
The chief financial officer (CFO). They’ll walk through the financial details: revenue, margins, costs, and anything accounting-related.
Investor relations (IR) host. Most earnings calls have an IR host to introduce the speakers, keep the call on track, and field questions.
Sell-side analysts. These are analysts from investment banks and research firms. They ask questions during the Q&A portion of the call to help refine their own models and inform their recommendations for clients.
Structure of an earnings call
Earnings calls typically follow the same structure:
Prepared remarks
The call usually starts with prepared statements from the CEO and the CFO. Expect to hear a polished overview of:
The quarter or year (a recap)
Highlights and wins
Challenges, contextualized
The long-term strategy and vision
What to listen for: how leadership speaks is an important cue. Overly scripted language and hesitation can be an indicator of uncertainty or something to hide. Too many buzzwords and vague language might signal that the company lacks a detailed plan.
Financial overview
The CFO will take over to walk listeners through all things financial, including:
Revenue and profit trends
Margins (gross, operating, net)
Cash flow
Debt levels and losses
Any unusual items, like gains or losses from selling part of the business or legal settlements
Updated management outlook (if available)
What to listen for: how the CFO positions the results. Do they overemphasize positive trends and try to downplay (or gloss over) weak spots? This is where familiarity with the quarterly or annual report is helpful. When you already understand the numbers and how they compare to the previous report, you can sense what kind of narrative the company is trying to put forward on the call.
Strategic or operational updates
Once the recap has ended, the call delves into what investors and shareholders can expect next. This portion is often led by the CEO, or sometimes the chief operating officer (COO). They discuss things like:
Product launches
Expansion plans
Cost-cutting or other efficiency initiatives
Pending market or regulatory changes that could affect the company
What to listen for: whether the strategy sounds concrete and achievable, or more like high-level promises. Plans backed by timelines and metrics are a sign of confidence. Goals that are vague, overly aspirational, or repetitive of previous earnings calls are worth second-guessing.
Analyst Q&A session
Once company leadership has finished its presentation, the IR will open the floor to analysts. This is where you’ll get the kind of commentary and insights that aren’t included in reports. Analysts will ask the tough questions about weak results, competition, and growth strategy.
What to listen for: questions (or themes) that come up repeatedly, which suggests analysts are feeling wary or nervous. Pay attention to how leadership receives a question (e.g., are they receptive or do they seem hesitant to answer?), and how well they answer it. Clear, straightforward responses indicate transparency and confidence; vague, corporate speak can suggest avoidance or uncertainty.
How to use earnings call transcripts for insights
If you miss an earnings call or you want to catch details you might’ve missed, earnings call transcripts are incredibly useful. They allow you to compare current and past calls, identify changes in tone or confidence, and get a more detailed sense of what company leadership emphasized or skimmed over.
What you can learn beyond the numbers
Reading transcripts helps you track shifts in the company’s narrative. Watch for changes in confidence levels, new risks or competitive pressures, and any statements that feel overly vague or overly optimistic. If what’s being said doesn’t quite match the quarterly or annual report, that’s a signal to look closer.
How to analyze transcripts effectively
Use CTRL+F to quickly jump to sections you care about and find keywords.
Look for themes that recur across quarters or years; repeat issues or promises might point to ineffective management or a lack of momentum.
Compare words to results. Look for anything company leadership says that might contradict what appears in the quarterly or annual report.
KPIs: which ones matter and how to track trends
The financial statements provided in annual/quarterly reports tell you what happened. Key performance indicators (KPIs) are metrics that tell you how it happened.
You’ll usually find them scattered throughout the MD&A section or in footnotes/figures of quarterly or annual reports, and on slides presented during earnings calls.
Knowing which KPIs matter and how to spot KPI trends can give you a more well-rounded picture of a company’s health than standalone financial metrics.
Industry-specific metrics
Different industries track different KPIs, because what matters for one business often doesn’t matter for another. Here are some common examples:
Software as a Service (SaaS)/other subscription-based businesses
Annual recurring revenue (ARR): the company's predictable, yearly revenue
Churn rate: the percentage of customers leaving over a period
Net retention: growth from existing customers, after accounting for customers who don’t renew, and expansion
Retail
Same-store sales: revenue growth at stores that have been open for at least a year
Inventory turnover: how efficiently inventory is sold and replaced
Manufacturing
Capacity utilization: how well production resources are being used
Order backlog: future revenue that’s already been committed but not yet delivered
Financial services
Net interest margin: profit from lending vs. borrowing
Loan loss provisions: money set aside for potential bad loans
How to track KPI trends
Tracking KPIs and how they change from report to report (and call to call) gives you further context for figures in the financial statements. Trends tell a bigger story, and can give you reason to feel more — or less — confident in a company’s stability and potential.
Look quarter-over-quarter and year-over-year: Instead of focusing too heavily on a particularly strong or weak quarter, look for seasonal patterns or persistent trends.
Understand seasonal patterns: Many industries have fairly predictable cycles (e.g., retail explodes in Q4, energy use skyrockets in winter months). When you’re evaluating year-over-year changes, make sure you’re comparing the same quarter so you can spot actual changes instead of seasonal swings.
Benchmark against competitors: A KPI that’s rising might look good on its own, but if a company’s peers are growing that same KPI even faster, it may signal a competitive disadvantage.
How to build a one-page earnings debrief
An earnings debrief is like your personal cheat sheet for a report. It’s a simple, single-page summary you create yourself that summarizes a company’s key results, the insights you gleaned from the earnings call, and how all of that affects your own investment thesis. The goal: to quickly digest what matters most without getting lost in pages of reports or transcripts.
If you use a consistent template each time and hang onto each of your debriefs, then over time they can assist you in spotting patterns that help inform your investment decisions.
Here’s what your earnings debrief should include:
Summary of key financial results. Revenue, profit, margins, cash-flow highlights. Stick to the most meaningful numbers and highlight any trends.
Progress on strategic initiatives. These could be new products, expansion plans, cost-cutting, or other operational moves. Are the company’s initiatives on track?
Management tone and major takeaways from the earnings call. Did leadership seem confident, cautious, or vague? Did their tone shift from previous calls? Did they offer any new or significant takeaways?
KPI trends. Highlight key KPIs for the company and whether they’re improving, stable, or declining.
Guidance changes. Has anything changed in the forward-looking messaging? Note whether guidance seems realistic or not based on past results.
Risks or uncertainties. Flag whether the MD&A or earnings call mentioned risks that could affect future performance.
Your thesis impact statement. Finish with your personal take on whether the last quarter (or year) strengthens or weakens your portfolio position. This keeps you focused on the big picture rather than getting lost in the details.
The more you practice reviewing and analyzing earnings reports and calls, the easier it becomes to separate useful insights from the noise. Stick to the key figures, keep notes, and compare what leadership says (and how they say it) with what the numbers show. Over time, you’ll build confidence in your own judgment, and that’s one of the most valuable tools an investor can have.
