Analysis · Investing Glossary
What Is Guidance?
A company's own forecast of its future financial performance.
The Full Definition
Guidance is the forward-looking financial forecast a company's management provides — typically revenue and earnings ranges for the next quarter or year. Because the stock market is forward-looking, guidance often moves a stock more than the quarter's actual results: a company can beat earnings estimates and still see its stock fall if it guides future quarters lower than expected. Companies sometimes set deliberately conservative guidance to create room to "beat" it later, so seasoned investors weigh a company's historical guidance accuracy, not just the number itself.
Real-World Example
A retailer reports a strong holiday quarter but lowers guidance for the next year, citing softer consumer spending — the stock can drop on that forward-looking statement even though the just-reported quarter was excellent.
Related Terms
- Earnings ReportA company's quarterly disclosure of its financial results to investors.
- Earnings Per Share (EPS)A company's net profit divided by the number of outstanding shares.
- P/E RatioPrice-to-earnings ratio — how much investors pay per dollar of a company's earnings.
- ValuationAn estimate of what a company or asset is actually worth, compared to its market price.