The Anatomy of a Profit Warning

Stockopedia subscribers will be aware that last week we published a study of 245 profit warnings as "The Profit Warning Survival Guide" ... you can catch up on all the content in our quick read eBook, 30 minute Webinar and accompanying set of slides.   In the next few weeks we'll be serialising some of the content as blogs on the site.  For a background to the study please do read Ben's introduction here.   This article summarises one of the key findings... the average price performance of a stock during a profit warning.  The results are quite eye opening.

By combining the price histories before, during and after each profit warning in our study we built a model of the average price performance of a profit warning stock. Initially we looked at the week before a profit warning up to three months after, but the analysis was so startling that we had to push our timeframes out on both sides. It was only then that we could understand the full, complete picture.While the majority of the drama happens on the day of the profit warning itself, the true story unfolds over a two year...