Revenues

The revenues of the company refers to the sales turnover or the sales revenue of the company, acquired through its operations. The company’s revenues is reflected in the income statement of the company. It starts off at the top and the net income after tax is derived from the revenues of the company.

General  

If a company’s sales revenue is falling, net income may decrease and cause earnings per share to decrease. This will cause the share price of the company to decrease.

If a company’s sales is increasing , net income may increase which will cause earnings per share growth. When there is earnings per share growth, the share price of the company may increase.

There are many other factors to consider besides revenues. A company may have an increased revenue for a particular year but experience a lower net income figure because of its lower gross margins. Lower gross margins may be the result of increased raw material costs.

Sales Revenue & The Market Capitalisation

Sometimes, a company trades at a price that is only a fraction of the sales. For example, the company may be experiencing temporary losses. It has a market capitalisation of just $100 million. But its sales is $1 billion. The options trader has to ask himself what is the reason for the company trading at such low prices. If there is no justifiable reason, then such stock prices will revert to a mean. In an instance such as this, the options trader can bet on a LEAP call option to catch price movements to the upside. Learn how one fund manager earned more than 400% using LEAPS.

Read : Earnings Per Share

Net Earnings