When you read a press release, you are reading the company’s own version of events. That is useful, but it is not neutral. A careful reader learns to separate facts from marketing.
Here are seven tips to help you do it.
Tip 1: before you read a press release, check who wrote it
A press release comes from the company or its agent. It is designed to show the company in a good light.
So treat it as a starting point and not the final word.
Tip 2: read the headline, then ignore the adjectives
Headlines love words like record, breakthrough and transformative. Strip those out and see what is left.
If the plain version still sounds important, it may be.
Tip 3: look for numbers
Real news usually has numbers, such as sales, orders or dollars. Vague phrases like significant growth tell you little.
Also check if numbers are compared to something, like last year.
Tip 4: find the boilerplate and the cautions
Near the bottom you will see a company description and a forward looking statements note. That note lists risks that could change results.
Read it. It often tells you what could go wrong.
Tip 5: confirm with filings
Open the company’s filings on SEC EDGAR and see if the press release matches. Big claims should show up in official reports.
If they do not, ask why.
Tip 6: watch the timing
News that comes right after a stock jump, or right before an offering of new shares, deserves a closer look. Check whether the company is selling shares around the same time.
Tip 7: wait before acting
A press release can make a price jump for a day. Give yourself time to read and think.
Good opportunities rarely vanish in an afternoon.
An example in action
Say a press release says a small company signed a big agreement. Look for the customer name, the dollar value and the start date. If all three are missing, the news is vague.
Next, check whether the company has said anything about a new share sale. If it has, ask whether the news timing is helping it raise money.
This kind of calm check takes ten minutes and saves a lot of regret.
Tools to help
Use SEC EDGAR to compare the release to filings. Use a watchlist to track the stock before and after. Use the glossary for terms like dilution and forward looking statements.
Put it into practice
Pick one press release this week and walk through the seven tips. Write down what you learned. Also, you will get faster each time.
Keep learning
When you read a press release with care, you protect yourself and learn faster. Try our red flag game, browse company profiles and use the glossary for new terms.
Free investing games | Company profiles | Investing glossary | SEC EDGAR company search
Keep reading
- How Stock Splits Work
- What Is a Dividend and How Do Dividends Work?
- Read a Company Profile: A Plain English Walkthrough
This article is for education only. It is not investment advice, and it does not promise any result.