Why don't companies underestimate their earnings to make quarterly reports look better?
Stating poor estimates in advance will lower your share price to compensate for thge extras boost it gets later ... And may run afoul of stock manipulation laws. More pain than gain likely. You need to distinguish a company's guidance from analysts' estimates. A company will give a revenue/earnings guidance which is generally based on internal budgets. The guidance  may be aggressive or conservative - some managements are known to be conservative and the market will take that into account to form actual estimates. When you see a headline saying that a company missed, it is generally by reference to the analysts' estimates. Analysts use a company's guidance as one data point among many others to form a forecast of revenue/earnings. The idea behind those headlines is that the average sales/earnings estimates of analysts is a good approximation of what the market expects (which is debatable).
"A stock, at its most basic, is worth exactly what someone else will pay to buy it right now (or in the near future), just like anything else of value. However, what someone's willing to pay for it is typically based on what the person can get from it. There are a couple of ways to value a stock. The first way is on expected earnings per share, most of would normally (but not always) be paid in dividends. This is a metric that can be calculated based on the most recently reported earnings, and can be estimated based on news about the company or the industry its in (or those of suppliers, likely buyers, etc) to predict future earnings. Let's say the stock price is exactly $100 right now, and you buy one share. In one quarter, the company is expected to pay out $2 per share in dividends. That is a 2% ROI realized in 3 months. If you took that $2 and blew it on... coffee, maybe, or you stuffed it in your mattress, you'd realize a total gain of $8 in one year, or in ROI terms an annual rate of 8%. However, if you reinvested the money, you'd be making money on that money, and would have a little more. You can calculate the exact percentage using the ""future value"" formula. Conversely, if you wanted to know what you should pay, given this level of earnings per share, to realize a given rate of return, you can use the ""present value"" formula. If you wanted a 9% return on your money, you'd pay less for the stock than its current value, all other things being equal. Vice-versa if you were happy with a lesser rate of return. The current rate of return based on stock price and current earnings is what the market as a whole is willing to tolerate. This is how bonds are valued, based on a desired rate of return by the market, and it also works for stocks, with the caveat that the dividends, and what you'll get back at the ""end"", are no longer constant as they are with a bond. Now, in your case, the company doesn't pay dividends. Ever. It simply retains all the earnings it's ever made, reinvesting them into doing new things or more things. By the above method, the rate of return from dividends alone is zero, and so the future value of your investment is whatever you paid for it. People don't like it when the best case for their money is that it just sits there. However, there's another way to think of the stock's value, which is it's more core definition; a share of the company itself. If the company is profitable, and keeps all this profit, then a share of the company equals, in part, a share of that retained earnings. This is very simplistic, but if the company's assets are worth 1 billion dollars, and it has one hundred million shares of stock, each share of stock is worth $10, because that's the value of that fraction of the company as divided up among all outstanding shares. If the company then reports earnings of $100 million, the value of the company is now 1.1 billion, and its stock should go up to $11 per share, because that's the new value of one ten-millionth of the company's value. Your ROI on this stock is $1, in whatever time period the reporting happens (typically quarterly, giving this stock a roughly 4% APY). This is a totally valid way to value stocks and to shop for them; it's very similar to how commodities, for instance gold, are bought and sold. Gold never pays you dividends. Doesn't give you voting rights either. Its value at any given time is solely what someone else will pay to have it. That's just fine with a lot of people right now; gold's currently trading at around $1,700 an ounce, and it's been the biggest moneymaker in our economy since the bottom fell out of the housing market (if you'd bought gold in 2008, you would have more than doubled your money in 4 years; I challenge you to find anything else that's done nearly as well over the same time). In reality, a combination of both of these valuation methods are used to value stocks. If a stock pays dividends, then each person gets money now, but because there's less retained earnings and thus less change in the total asset value of the company, the actual share price doesn't move (much). If a stock doesn't pay dividends, then people only get money when they cash out the actual stock, but if the company is profitable (Apple, BH, etc) then one share should grow in value as the value of that small fraction of the company continues to grow. Both of these are sources of ROI, and both are seen in a company that will both retain some earnings and pay out dividends on the rest." "&gt; There are more types of ads than banner ads you see in the margins of websites, and they can't be blocked by ad blockers. Its a huge industry, saying it's going to die is pretty naive.  It's difficult to formulate a polite response, my message inbox is flooded with people who obviously have no idea what they're talking about, telling me about how my ad blockers aren't blocking the ads which I know they are blocking. And this account is new which means I can't respond to everyone without waiting unreasonable numbers of minutes.. so I want to make one response that's really good instead.  I am willing to bet that I have more knowledge and experience with the internet, technology, and computers than everyone in this thread combined. So you go on thinking I'm naive or whatever, but really you are the naive one for underestimating my expertise on the subject.  I am absolutely aware of what sort of ads are blocked by my ad blockers and what sorts arent. I belong to the class of people who taught you all how to use this stuff. All of the advertising that Google and Facebook use for their revenue is blocked. When you pay for ads on reddit, I don't see those. When you pay for adwords links on search engines, I don't see those. When you pay for video ads on youtube content, I don't see those. The only things that get through are things which cannot be detected such as spam posts posing as real content. But because I am a smart person I am capable of recognizing when an article is trying to sell me something. That is what you are getting at, unless you're completely wrong and just being stupid, but I'm giving you the benefit of the doubt. And while that tangent is true, it's irrelevant to the meat of the conversation, which is that the traditional methods of advertising, things like pay per click and number of impressions, things like adwords and facebook's ""boosted posts"", all of that is going away. If you rely on those things for your revenue stream you better start looking for other sources of income today because in a few years those streams will be completely dried up.  You can listen to me, because I am an expert on this technology and this culture which I have been using for 26 years, or you can convince yourself that you know better even tho we both know you do not. I don't know why it hurts your pride to get advice from someone who knows better than you, but that's my guess at why you and others are so defensive about this particular subject, that and because it's your bread and butter. I'm warning you, NOW is the time to look for other income generators, not 5 years from now when the entire advertising model is dead. (5 years is a guess, it could be sooner, it could be later, it will be.)  I suspect you're also afraid that you won't be able to find a new revenue model, but I think that fear is unfounded. People are creative, and have been inventing new ways to make money since money was invented. I'm telling you now is the time to do that, you should be thanking me." If I recall correctly off of their quarterly reporting, their major expense was Admin/Overhead.  I think it comprised of half of their expenses.  My disclaimer is that I just took a quick look at their financial report and might be remembering incorrectly. @bstpierre gave you an example of a portfolio similar to IFA's 70 portfolio. Please, look other variants of example portfolios there and investigate which would suit to you.  Although the example portfolios are not ETF-based, required by the op, you can rather easily check corresponding components with this tool here. Before deciding your portfolio, fire up a spreadsheet (samples here) and do calculations and do not underestimate things below: Bogleheads have already answered this type of questions so why not look there? Less reinventing the wheel: google retirement portfolios site:bogleheads.org. I am not making any recommendations like other replies because financial recommendations devalue. I hope I steered you to the right track, use less time to pick individual funds or stocks and use more time to do your research. You are omitting how the company made 120 million in the previous year and may be facing a shrinking market and thus have poor future prospects. If the company is shrinking, what will the shares be worth down the road. Remember companies like AOL or Blackberry? There was a time they had big profits before things changed which is the part you aren't considering here. If the company has lost something big on its earnings, e.g. the oil wells it owned have run out of reserves or the patents on its key drugs have expired, then there could be the perception that the company won't be able to compete in the future to continue to deliver earnings. Some companies may well end up going broke as one could look at GM for a company that used to be one of the largest car companies in the world and yet it ended up going broke. What the fuck are you talking about? They amended their S-1 filing with the SEC. The revenue outlook was a matter of public record. It's not their fault that no one actually reads the filings. The purpose of the filings is to make such information public. It's the fault of stupid investors and incompetent analysts and journalists for not reading the fucking disclosure documents. Do you really expect them to go out of their way to announce negative data? Because that's crazy. They will do the bare minimum required by law. Smart people that read the disclosure documents then discuss this info. Dumb money just buys the hype. This was not a disclosure failure. All the info was there to be used. You have defined net profit to include all income and, presumably, expenses. Specifically, you are including income from other sources and are including finance costs and tax expense. For the quarter ended June 30, 2015, the net profit, by your definition, is 12.58. This is given on line 9 of the PDF. You ask how you can review this information. You cannot, given only the PDF you linked to. Note that the numbers have not been audited so it is the case that no trusted third party has yet reviewed it and signed off that the information is accurate. What I know about small companies and companies who are not listed on the stock markets is this: If a small company has shares issued to different people either within an organization or outside the value of the shares is generally decided by the individual who wants to sell the share and the buyer who wants to buy it. Suppose my company issued 10 shares to you for your help in the organization. Now you need money and you want to sell it. You can offer it at any price you want to to the buyer. If the buyer accepts your offer thats the price you get. So the price of the share is determined by the price a buyer is willing to buy it at from you. Remember the Face value of the shares remains the same no matter what price you sell it for. Now annual profit distribution is again something called dividends. Suppose my company has 100 shares in total out of which I have given you 10. This means you are a 10% owner of the company and you will be entitled to 10% of the net profit the company makes. Now at the end of the year suppose my company makes a 12,000 USD net profit. Now a panel called board of directors which is appointed by share holders will decide on how much profit to keep within the company for future business and how much to distribute about share holders. Suppose they decide to keep 2000 and distribute 10,000 out of total profit. Since you own 10% shares of the company you get 1000. The softwares you are talking are accounting softwares. You can do everything with those softwares. After-all a company is only about profit and loss statements.