Definition
Guidance (Management)
Guidance is management's forward-looking estimate of future performance, like expected revenue or margin, that shapes investor expectations.
On earnings calls and in filings, management often gives guidance on metrics like revenue growth, margins, or order pipeline for coming quarters/years. Markets react strongly to changes, raised guidance is bullish, cut or withdrawn guidance is bearish.
Guidance helps investors model future earnings and is central to valuing growth stocks. But it is an estimate, not a promise; investors weigh management's track record of meeting guidance and watch for over-promising. A company beating results but cutting guidance can still fall.
Related terms
- Growth InvestingGrowth investing focuses on companies expected to grow earnings and revenue much faster than average, even if their valuations look expensive today.
- Earnings YieldEarnings yield is the inverse of the P/E ratio, expressing a company's earnings as a percentage of its price, comparable to a bond yield.
- Earnings SurpriseAn earnings surprise is the gap between a company's reported results and analyst expectations, which can move the stock sharply.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.