What is a Sandbag 'Sandbag'

To sandbag is to lower expectations of a company's or individual's strength in order to produce greater than anticipated results. Sandbagging, in business, is most often seen when company managers temper the expectations of shareholders by giving guidance below what they know will be achieved. The result is that once the better-than-expected results are presented, investors are more impressed than they would have been if the company had merely met expectations.

BREAKING DOWN 'Sandbag'

Sandbagging has become commonplace in the forward guidance about expected revenues and earnings. As a result, the response of investors is often more muted than it would be otherwise. In some cases, a company that has sandbagged analysts may beat expectations only to see its stock price fall because earnings failed to exceed expectations by as much as investors expected. 

Example of a Sandbag

Imagine that Orange Inc. has gained a reputation for being a straight shooter, not a sandbagger, in providing guidance on quarterly results. During the last quarter, the company said it was likely to post modest growth in sales and earnings. Analysts and pundits alike are confident that upcoming quarterly numbers will be uneventful. But when results were released, they are higher than the consensus estimate, resulting in analyst upgrades and positive press coverage.

Imagine the above scenario except that the company has a reputation for sandbagging. Because of the company's reputation, the stock price could be largely unaffected by the better-than-expected quarterly results.

RELATED TERMS
  1. Prophet's Reputation Management ...

    Prophet's Reputation Management Index was created by strategic ...
  2. Pundit

    A pundit is a person that publicly expresses their opinions or ...
  3. Upgrade

    An upgrade is a positive change in the fundamentals underlying ...
  4. Below the Market

    Below the market can refer to any type of purchase or investment ...
  5. Earnings Call

    Earnings call is a conference call between a public company, ...
  6. Interest Coverage Ratio

    The interest coverage ratio is a debt ratio and profitability ...
Related Articles
  1. Investing

    Mergers And Acquisitions: Understanding Takeovers

    In the language of mergers and acquisitions, battleground terms meld with bizarre metaphors to create a unique vocabulary.
  2. Investing

    Earnings Guidance: Can It Predict the Future?

    Explore the controversies surrounding companies commenting on their forward-looking expectations.
  3. Investing

    Today’s Losers, Tomorrow’s Winners

    These two stocks have been taking a beating, and that might continue for a while, but the long-term potential is exceptional.
  4. Investing

    The Flow of Company Information

    Learn how to gather all the pieces before you start to put together your puzzle.
  5. Trading

    TrueCar Stock Set to Test Support After Weak Guidance

    TrueCar shares moved lower in pre-market hours following its fourth quarter results, but traders will be watching these key levels.
  6. Investing

    The Restoration of Restoration Hardware Continues

    Restoration Hardware reported strong quarterly results that beat expectations, advancing its turnaround story.
  7. Trading

    FitBit Breaks Out as Earnings Exceed Expectations

    FitBit Inc. moved more than 10% higher on Thursday after exceeding analyst expectations.
  8. Investing

    AMC Issues Preliminary Full Year 2016 Results

    The company's preliminary results look promising but where is the growth really coming from?
  9. Investing

    3 Suggestions Before Reading Analyst Stock Recommendation

    Discover the true motivations and priorities of sell-side analysts and why individual investors should ignore consensus estimates for earnings and revenues.
  10. Investing

    Q1 Technology Sector Earnings Preview

    Earnings season is here, we preview some of the major tech earnings to watch for in the weeks ahead.
RELATED FAQS
  1. What is a quarterly report?

    Learn about quarterly reports and why they are important to investors. Explore street consensus estimates and how reported ... Read Answer >>
  2. Why do analysts sometimes give an overweight recommendation on a stock?

    If analysts give a stock an overweight rating, they expect the stock to outperform its industry in the market. Read Answer >>
  3. How rapidly can expanding sales reduce a firm's earnings?

    In order to operate and make money, a company must spend money. Revenue - the dollar amount of sales - can be seen on a company's ... Read Answer >>
  4. What is the formula for calculating earnings per share?

    Learn how to calculate earnings per share and why it's an important gauge in determining a stock’s value and a company's ... Read Answer >>
Trading Center