Start with the company release
Headlines compress complex reports into one number. Open the earnings release, investor presentation and regulatory filing when available. Identify whether reported earnings are comparable with the prior period and whether one-time items explain the apparent growth.
Record revenue, earnings per share, year-over-year growth, analyst expectations and management guidance. The task is not to build a complete valuation model before the open. It is to determine whether the market received information meaningfully different from what it expected.
Measure the expectations reset
An excellent quarter can produce a weak reaction if investors expected even more. A modest absolute number can produce a powerful move when expectations were low. Compare the report with consensus, previous guidance and the company's recent trend.
Growth
Are sales and earnings accelerating, decelerating or recovering from an unusual comparison?
Beat
How far did results differ from published expectations, and was the beat broad or dependent on one line?
Guidance
Did management raise, maintain or reduce the forward outlook?
Narrative change
Did a new product, contract, margin shift or customer trend alter the longer-term story?
The prior chart determines room
A stock that moved sideways for months can have more room for revaluation than one that doubled into the report. Record the three- and six-month return, distance from moving averages and whether a previous gap already began the same story.
Quiet prior action does not guarantee success, but it changes the supply picture. Holders have not already received a large advance, and the new information may require analysts and institutions to rebuild their assumptions.
Let volume confirm attention
Compare premarket volume with normal daily volume, then observe how participation develops after the open. Exceptional turnover shows that the report is attracting more than a thin premarket reaction.
- Gap percentage at the regular-session open
- Premarket shares traded and spread
- Time required to reach average daily volume
- Volume during the selected opening range
- Ability to hold the open, VWAP and low of day
- Sector peers reacting to the same information
A candidate can have excellent numbers and still fail. The report creates the thesis; the market response confirms or rejects the trade.
A one-page EP worksheet
- Catalyst and link to the primary report
- Revenue and EPS growth versus expectations
- Guidance change and management explanation
- Three- and six-month price action
- Gap percentage and relative volume
- Opening-range timeframe, trigger and low-of-day stop distance
- Liquidity, spread, earnings-call timing and known event risk
Complete the worksheet before deciding that a gap is an EP. The label should be earned by evidence, not assigned because the stock appears near the top of a premarket scanner.