Gordmans Stores, Inc. (GMAN), JA Solar Holdings Co., Ltd. (ADR) (JASO), Sonic Corporation (SONC): Three Companies That Reported Earnings on Monday: Value or Value Trap?

Back when 2013 first began, there were a lot of people who believed that solar stocks would be the top performers of the market. However, it is shaping up to appear as though this industry will continue to report disappointment, and JA Solar is a perfect example. At first glance, the company looks undervalued, being a $1 billion business with a $140 million market cap. However, the problem is volatility, inconsistencies, and its balance sheet. At this point, the company’s future could go either way, towards bankruptcy or towards improvement. Unfortunately, it’s hard to determine its correct path, and I view the stock as having way too much risk for a long-term investment.

Conclusion

When a stock trades drastically lower or pops significantly higher after earnings you must ask yourself “was the news worth the movement?” In my book, “Taking Charge With Value Investing (McGraw-Hill, 2013)” I discuss how far too often we make assumptions based on performance, a statement that is backed with countless studies on human behavior. But the best investors are able to use stock movement as an opportunity to capitalize on value. Therefore, as I’ve discussed often, when it comes to earnings, read the report first and then assess the performance second, and you will find inconsistencies you can profit from.

The article Three Companies That Reported Earnings on Monday: Value or Value Trap? originally appeared on Fool.com and is written by Brian Nichols.

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