Earnings season is now well underway and it's a great chance to have a look at how our shares have done over the past year.
Some of them may report profit figures reflecting what the market expected, but there may be others that don't do so well.
What should you do if your shares report figures that are below expectations?
Don't panic, that is the first thing to make sure of. There are very few businesses in the world that report growth every single year and half-year.
With a cool, logical frame of mind you need to analyse why the business was below expectations. Were you and the market expecting too much growth from this report?
In most scenarios where the share price drops after a report I think investors have to consider if it's a long-term issue or a short-term issue. Ramsay Health Care Limited (ASX: RHC) and Healthscope Ltd (ASX: HSO) could report one bad year but the ageing demographics of Australia should still heavily boost them in the long-term.
However, Cabcharge Australia Limited (ASX: CAB) reporting lower revenue could be something it never recovers from.
If Wesfarmers Ltd (ASX: WES) reports lower profit and profit margins due to competitors it's worth thinking about if those competitors are ever going to go away.
Perhaps it's an opportunity
If one of your favourites reports underwhelming numbers but the long-term investment thesis is intact then that could actually create an opportunity to buy more shares if the price drops temporarily.
I don't want Challenger Ltd (ASX: CGF), Ramsay or National Veterinary Care Ltd (ASX: NVL) to report below expectations but I'll be ready to buy shares if the price falls.
Foolish takeaway
Never forget that investing is a long-term activity that rewards patient shareholders. You just have to make sure you're invested in shares that will grow over the long-term.
