How to Read a 10-K and an Earnings Report: A Beginner Walkthrough
How to Read an Earnings Report / 10-K
Every US public company files a yearly 10-K and quarterly 10-Qs with the SEC. Here is where to find them and what to read first.
Where to find filings
- Search any company on SEC EDGAR full-text search (free).
- 10-K = annual report (audited). 10-Q = quarterly (unaudited). 8-K = major event, including earnings press releases.
- The company's investor relations page usually has the earnings slides and call transcript.
Read in this order
| Section | What to look for |
|---|---|
| Item 1: Business | How the company makes money and its main segments |
| Item 1A: Risk Factors | Risks the company itself highlights; new ones matter most |
| Item 7: MD&A | Management's explanation of results, margins and outlook |
| Income statement | Revenue, gross margin, operating income, net income, EPS |
| Balance sheet | Cash, debt, total assets vs liabilities, shareholders' equity |
| Cash flow statement | Operating cash flow, capital spending, free cash flow, buybacks and dividends |
| Notes | Debt maturities, share count changes, one-off items |
Quick checks
- Is revenue growing, and is gross margin stable?
- Does operating cash flow roughly track net income? A big gap needs explaining.
- Is debt rising faster than earnings?
- Is the share count falling (buybacks) or rising (dilution)?
- Compare against the same quarter last year, not just last quarter, for seasonal businesses.
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