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Proforma earnings statements can significantly impact stock prices. Research shows that when these statements are prominently displayed in the headline or first paragraph of a company's news release, they have a much stronger impact on stock prices than when reported elsewhere in the document. This is because these statements provide investors with a projection of the company's future earnings, which can influence their decision to buy or sell the company's stock.
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How to effectively show the investment and reward opportunities of a new venture or project? Use our "Ultimate Startup Pro Forma" model to showcase a...
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In his article for Harvard Business Review, Baruch Lev – the Philip Bardes Professor of Accounting and Finance at the Stern School of Business in NYU, talks about proforma as one of the ways in which managers can impart useful information to investors. (For more like this, check out our book summary). Lev stresses that "research shows that proforma earnings statements prominently displayed in the headline or first paragraph of a company's news release have a much stronger impact on stock prices than proforma earnings reported elsewhere in the document."
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