Beware of Companies That Game the System

Earnings season is a time for companies to lay their financial cards on the table for the previous quarter.

Although there are rules and regulations prohibiting companies from reporting false information, some companies hope to give their stock a bump by suggesting the number will be lower and then - surprise - the company beats estimates.

Stock analysts and savvy investors can spot companies that make a habit of this and discount their advise, but others may not know and jump on the stock when it beats estimates.

The system works best when every company offers honest advise prior to reporting earnings.

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