Sales Analysis for Stock Market Decisions
Detailed information on market shares and brand ranks in key market segments can present a very different picture from global figures. It is possible to window dress very poor performance in strategic aspects of a business. Executives can use deep discounts and expensive promotions to compensate important changes in customer behavior. The stock market must work against letting such moves cloud judgment of corporate results.
Professional companies subscribe to independent retail audits which track industry fortunes at ground zero. It would help if investors could access such information, but confidentiality concerns often prevent companies from sharing such information freely. It is worth subscribing to such information directly, either as an individual or as a shared expense between groups of investors.
A cheaper way to analyze sales trends as stock professionals should, is to compare sales performance of competitors. This can work well for local companies with only one major brand each. Some companies report on proportions of sales from new products and acquisitions of new customers. It helps if stock market operators ask such questions, with evidence, in case managements are not forthcoming. Members of the distribution chain and suppliers of goods and services are often free repositories of sales intelligence of top companies.
The price increase and volume components are also telling ways of analyzing sales performance. The ratio of cost of goods sold to revenue is a trend which can uncover elements of this aspect even if managements withhold such information. Beware of sales growth in excess of profitability, unless you get convincing reasons for sacrificing margins for volume growth.
Stagnant sales may precede some of the best marketing investments, and dream growth rates may not be sustainable. It is therefore to take statutory sales reporting with pinches of salt, and to keep looking or to withdraw investments if satisfactory answers are not uncovered.