Ask a Fool: If a Stock Falls After Earnings, Is It Time to Buy?

The short answer is that it depends why the company's quarterly report caused the share price to drop.

If something fundamentally changed with the business that could become a long-term issue, such as a slowing growth rate, intensifying competition, or declining sales, then that share price drop could be entirely justified.

One example that immediately comes to mind is Starbucks (NASDAQ: SBUX), which reported earnings just a few hours before I wrote this. The coffee chain's same-store sales growth missed expectations by a wide margin due to challenges that have been cutting into its store traffic since last year. Those factors indicate that its growth could be slower than had been anticipated. I'm not saying that Starbucks is a bad stock to own – rather, I'm saying that slowing growth could be a long-term issue, and as such needs to be taken into account when valuing the stock.

Source: Fool.com