Copart (NASDAQ:CPRT) is scheduled to announce its earnings in the next week. The company currently holds a market capitalization of $40 billion. Its revenue for the past twelve months stood at $4.6 billion, and it achieved operational profitability with $1.7 billion in operating profits and a net income of $1.6 billion. Although much will be determined by how the outcomes compare with consensus and expectations, examining historical patterns could potentially increase your odds if you engage in event-driven trading.
There are two approaches to achieve this: one can understand the historical odds and position oneself before the earnings announcement, or one can analyze the correlation between immediate and medium-term returns after earnings and adjust their strategy accordingly following the announcements.
View earnings reaction history of all stocks
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Copart’s Historical Odds of Positive Returns Following Earnings
Here are some insights regarding one-day (1D) post-earnings returns:
- There are 19 earnings data points documented over the last five years, showing 7 positive and 12 negative one-day (1D) returns. To summarize, positive 1D returns occurred approximately 37% of the time.
- Interestingly, this percentage rises to 45% when considering data from the last 3 years instead of 5.
- The median of the 7 positive returns is 2.6%, and the median of the 12 negative returns is -1.8%.
Additional details regarding the 5-Day (5D) and 21-Day (21D) returns post earnings are displayed alongside the statistics in the table below.
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively lower-risk strategy (though not applicable if the correlation is weak) is to examine the correlation between short-term and medium-term returns following earnings announcements, identify a pair with the strongest correlation, and carry out the suitable trade. For instance, if the 1D and 5D returns exhibit the highest correlation, a trader can position themselves “long” for the following 5 days if the 1D post-earnings return is positive. Below is some correlation information based on a 5-year and a 3-year (more recent) history. Note that the correlation 1D_5D indicates the correlation between 1D post-earnings returns and the subsequent 5D returns.
Is There Any Correlation With Peer Earnings?
Occasionally, the performance of peers can impact post-earnings stock reactions. The pricing may begin prior to the earnings announcement. Below is historical data reflecting the past post-earnings performance of Copart stock in comparison with the stock performances of peers that reported their earnings just before Copart. To ensure fair comparison, peer stock returns also illustrate post-earnings one-day (1D) returns.
* N/A indicates that the peer reported earnings after CPRT
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