Earnings Season
Is sales team growth an indicator of stock performance?
What can human capital and job changes tell us about the likely success of a company and equity?
As we’re in the heat of earnings season, I dug into five public cybersecurity companies to see which human capital elements may be leading indicators of stock performance.
The punchline 👇
The three companies that have seen stock price growth in the last year are also the three companies that have grown their sales teams. The two companies that shrunk their sales teams have lost market value.
The latest human capital data for these five equities indicates a relationship between sales team growth and stock price performance. Companies that expanded their sales teams — Palo Alto Networks, CrowdStrike, and SentinelOne — experienced significant stock price gains.
In contrast, companies that reduced their sales teams — Fortinet and Rapid7 — experienced declines in their stock prices.
Causation or Correlation?
We all have our hunches, but our job is to surface these signals and pass them to you for you to decide. At a minimum, the data suggests a relationship and most would agree that changes to a company’s investment in its sales team are an indicator of a company's confidence in its market position, ability and need to sell its products, and future revenue and earnings potential.
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Other indicators
Which other human capital factors are most correlated with stock performance?
Over the next few weeks, I’ll be digging into other relationships between human capital and stock price, earnings estimates, and other measures of equity performance.
Which factors do you think are most correlated with equity performance? For leading indicators, what do you think the lead time is?
Follow along as I explore more human capital relationships.
What questions would you ask?
To put context around the “big numbers” of real-time human capital and job change data – specifically, 1M+ monthly changes detected across the 90M+ white-collar professionals in our curated database – I started asking questions of the latest job change data.
For every question, there are answers, insights, and… more questions.
I’m constantly thinking about the next batch of questions and insights to dig into. If there is a human capital data question you’re interested in exploring, leave a comment below or reach out directly via LinkedIn.