Earnings season is in full swing, with hundreds of companies reporting quarterly financial results. These reports are a valuable tool to gain insights into a business or industry, benchmark a company versus its peers or test whether an investment thesis is working. However, some investors tend to place excessive importance on a single earnings report, mischaracterizing the strength or weakness of a company’s short-term financial performance as durable, missing the cyclical or temporary factors that may have caused the earnings surprise, and failing to understand the principle of reversion to the mean.