When to Sell a Stock — The 12 Signals Investors Should Never Ignore

When to Sell a Stock — 12 Signals Singapore Investors Should Never Ignore

A calm, accountant-style framework to protect capital, avoid hope-driven holding, and make better long-term decisions on SGX.

Published: 15 November 2025 | Category: Investor Education / Earnings Analysis

Key Takeaways (If You Only Have 30 Seconds)

• Selling is not about fear — it’s about discipline and protecting capital.
• One bad quarter is noise; two is a warning; three is a trend — use SGX earnings analysis to confirm.
• Watch cash flow vs profit: rising profit with falling cash flow is a classic danger pattern.
• Rising debt/gearing without clear benefit often leads to dividend pressure (especially REITs).
• Dividend/DPU instability usually shows up before the headline cut — track sustainability early.
• Management credibility and capital allocation mistakes can be stronger sell signals than “cheap valuation”.
• The most important rule: if your original thesis is broken, sell — don’t hold on hope.

Contents

1. Big Picture
2. Results Summary
3. Income Statement
4. Margins & Profitability
5. Balance Sheet
6. Cash Flow
7. Dividends
8. Management Commentary
9. A Simple Analyst Framework
10. Common Red Flags
11. My Overall Take
12. FAQ

Buying a stock is easy. Selling a stock — at the right time — is much harder.

Most investors sell too early out of fear, or too late out of hope. A good investor knows when to sell, but a great investor knows when NOT to sell.

This guide summarises 12 signals you should never ignore, based on patterns that repeatedly appear in quarterly results, annual reports, and real-world market behaviour. If you want to learn how to read quarterly earnings like an analyst, this is the “exit” side of that same discipline.

1. Big Picture

Selling is a risk management decision, not an emotional decision. The purpose is simple: protect capital and free it for better compounding.

Most long-term underperformance comes from a small number of avoidable mistakes:

• Holding through clear fundamental deterioration.
• Ignoring leverage until the dividend gets cut.
• Trusting accounting profit while cash flow weakens.
• Letting narratives replace numbers.

The goal is not “perfect timing”. The goal is a repeatable process that avoids obvious, permanent damage.

2. Results Summary

These are the 12 signals (and one bonus) covered in this guide:

1. Falling fundamentals (revenue, profit, margins, cash flow deteriorate).
2. Rising debt/gearing with no clear benefit.
3. Cash flow turns negative even if profit looks fine.
4. DPU/dividends become unstable.
5. Management loses credibility.
6. Major shareholder or key management sells heavily.
7. Business model weakens or becomes obsolete.
8. Profit relies too much on one-off gains.
9. Rising interest rates hurt the business (interest sensitivity).
10. Price breaks long-term support on strong volume (as a secondary signal).
11. Better opportunities appear (opportunity cost).
12. Your original thesis is broken.

Bonus: you no longer understand the company (opacity or major strategy shifts).

The best way to apply these is to anchor decisions in the quarterly cycle: read the numbers, interpret the drivers, and confirm the trend — that is real SGX earnings analysis in action.

3. Income Statement

The income statement is where deterioration often shows up first: revenue declines, profit shrinks, and recurring earnings weaken.

The sell signal is not “one bad quarter”. The sell signal is persistent weakening.

• One bad quarter: noise.
• Two bad quarters: warning.
• Three bad quarters: trend.

Another classic danger pattern: profits supported by “other income” rather than business performance. Watch for earnings inflated by:

• fair value gains
• disposal gains
• revaluation gains
• FX gains
• government grants
• vague “other income” lines

Explaining it like you’re 11

Imagine your class test score looks higher because the teacher gave you extra “bonus marks”. If your real answers are getting worse every term, the bonus marks can’t save you forever. In investing, one-off gains are like bonus marks — they don’t fix a weakening business.

Analyst Insight

• When you learn how to read quarterly earnings, you are really tracking recurring earning power, not “headline profit”.
• If recurring profit weakens while one-offs rise, expect future disappointment.
• Use the 3-quarter pattern: repeated deterioration is usually structural, not temporary.

4. Margins & Profitability

Margins are the “quality meter” of a business. If margins keep falling, it often signals weaker pricing power, rising costs, or intensifying competition.

The key risk is persistent margin erosion, especially when management keeps explaining it away.

• gross margin falling
• operating margin falling
• cost pressures becoming structural
• profit shrinking even when revenue is stable

Explaining it like you’re 11

If you sell cookies for $2 and it costs $1 to bake, you keep $1. If next year you only keep 20 cents, you are working harder but keeping less. That’s what falling margins look like — it’s often a sign the business is losing strength.

Analyst Insight

• Margins often weaken before revenue collapses — they are an early warning signal.
• Three consecutive quarters of margin compression deserves a serious review of the thesis.
• In mature SGX businesses, “margin expansion forever” is rarely realistic; treat optimistic narratives cautiously.

5. Balance Sheet

Rising debt is not automatically bad if it funds productive expansion. But it becomes a sell signal when debt rises without clear benefit — and risk builds quietly.

Be cautious when you see:

• debt rising faster than assets
• gearing climbing quarter after quarter
• cost of debt increasing
• interest coverage falling
• refinancing risk building

This is particularly important for REITs, property developers, and capital-intensive industries. In these sectors, the balance sheet often decides whether dividends survive.

Explaining it like you’re 11

Borrowing can help you buy a bicycle and get to school faster. But if you borrow too much, even a small problem becomes scary — because you still must pay back the loan. Companies with too much debt can “look fine” until suddenly they don’t.

Analyst Insight

• Debt is manageable only when cash flow is stable — leverage plus volatility is the danger combination.
• When interest coverage weakens, dividend risk rises — the market often reacts late, not early.
• In SGX yield counters, leverage is one of the fastest paths to a “surprise” dividend cut.

6. Cash Flow

This is the section that saves investors the most pain. Accounting profit can be presented attractively. Cash flow is harder to fake.

Red flags include:

• negative operating cash flow
• rising receivables (cash not collected)
• ballooning inventory
• poor cash collection
• large working capital swings

If profit rises but cash flow falls, treat it as an early warning. This is the classic “cash flow vs profit” problem that appears repeatedly in SGX earnings analysis.

Explaining it like you’re 11

Profit is what you write in your notebook. Cash flow is the money in your wallet. If your notebook says you’re doing great but your wallet is empty, something is wrong.

Analyst Insight

• Cash flow deterioration often appears before earnings disappoint — it is an early “quality of earnings” signal.
• Working capital swings can hide problems (slow customers, forced discounting, inventory build-up).
• If cash flow remains weak across multiple quarters, re-check the thesis and dividend safety immediately.

7. Dividends

For REITs and income stocks, dividend stability is part of the investment thesis. When dividends or DPU become unstable, it is often a sell signal — not a “buy more because yield is higher” moment.

Warning signs:

• payout ratio consistently > 80–90% (non-REITs)
• DPU falling two years in a row (pattern, not one-off)
• dividends funded by debt
• lack of free cash flow support
• management “promising” high dividends without evidence

A dividend cut often triggers a sharp share price fall. The discipline is to evaluate dividend sustainability early, using quarterly filings and cash flow checks.

Explaining it like you’re 11

Dividends are like pocket money. If it comes from real allowance every month, it can continue. If it comes from borrowing from your friend, it will stop — and you’ll still owe money.

Analyst Insight

• Dividend sustainability is not about last year’s yield; it’s about future cash flow capacity.
• For REITs, rising interest expense and weaker ICR are often early “dividend pressure” indicators.
• When leverage rises and cash flow weakens, assume dividend risk increases — until proven otherwise.

8. Management Commentary

Numbers matter, but management credibility determines whether you can trust the future. This is one of the most underestimated sell signals.

Warning patterns include:

• frequent excuses and shifting narratives
• overly optimistic guidance that repeatedly misses
• inconsistent commentary quarter to quarter
• poor capital allocation (value-destructive acquisitions)
• hiding negative information until forced
• unexpected resignations in key roles

Also watch insider behaviour. Insiders sell for many reasons, but large, sudden, or repeated selling can be a caution signal:

• CEO offloading
• board members exiting
• founders reducing stakes
• major shareholder divestment

When management cannot be trusted, your analysis becomes less reliable. In that situation, selling is often the disciplined choice.

9. A Simple Analyst Framework

Here is how I combine the signals into a simple sell framework — designed to work with the quarterly cycle. If you already practise how to read quarterly earnings, this becomes the natural “decision layer”.

Step 1: Check Fundamentals

• Are revenue, profit, margins, or cash flow deteriorating?
• Is debt rising, or is interest coverage weakening?
• Is profit quality getting worse (more one-offs, weaker recurring earnings)?

Step 2: Check Management & Strategy

• Is management credible and consistent?
• Are they allocating capital sensibly?
• Is the business model strengthening or becoming obsolete?

Step 3: Check Opportunity Cost

• Is there a significantly better risk/reward elsewhere?
• Is capital stuck in a low-upside, weakening situation?
• Would reallocating improve long-term compounding?

The most important rule is still this: sell when your original thesis is broken.

Before buying, write one sentence:
“I’m buying because… [specific reasons]”

If those reasons are no longer true (margins shrinking, ROIC falling, debt rising, industry outlook weakening) → the thesis is broken → sell.

Bonus rule: if the company becomes too complicated, too opaque, or changes direction dramatically — and you no longer understand it — clarity has disappeared. In investing, lack of clarity is risk.

10. Common Red Flags

These red flags frequently appear before major drawdowns or dividend cuts — especially in slower-moving markets like SGX.

• Revenue decline + margin compression (double hit).
• Profit rising mainly due to one-off gains.
• Cash flow weakening while profit “looks fine”.
• Gearing rising + interest coverage falling.
• Dividend promises without cash flow support.
• Repeated “this is temporary” explanations across multiple quarters.
• Business model erosion (disruption, regulation, competition).
• Interest-rate sensitivity building (REITs, developers, leveraged companies).

A note on price charts: a break of long-term support on strong volume can be a useful secondary signal, but it should support — not replace — fundamentals. If fundamentals are improving, a chart break may be noise. If fundamentals are deteriorating, a chart break can confirm the market is noticing.

11. My Overall Take as an Accounting-Trained Investor

A simple explanation for an 11-year-old

Selling is like leaving a game when the rules change and you’re no longer winning fairly. If the team is getting weaker every match, and the coach keeps making bad decisions, you don’t stay just because you hope. You choose a better game to play.

• What matters most: fundamentals, cash flow quality, leverage, and management credibility.
• What to ignore: daily noise, hope-driven narratives, and “it will surely rebound” thinking without evidence.
• How this improves decision-making: you cut losers earlier, protect capital, and reallocate to better compounding.
• Why consistency beats prediction: you don’t need perfect exits — you need to avoid the big permanent mistakes.

12. FAQ

How do I know if a bad quarter is noise or a real trend?
Use the “three-quarter” discipline: one is noise, two is a warning, three is a trend. Confirm using SGX earnings analysis (drivers, margins, cash flow), not headlines.

Is profit or cash flow more important?
Both matter, but cash flow is the reality check. “Cash flow vs profit” gaps (profit up, cash down) are often early warning signs.

Can dividends be misleading?
Yes. A high yield can come from falling prices or unsustainable payouts. Always assess dividend sustainability using cash flow, leverage, and interest coverage.

How often should I review whether to sell?
Quarterly is a good rhythm for long-term investors — aligned to results announcements and real business progress.

Is this framework suitable for REITs?
Yes. For REITs, prioritise gearing, ICR, cost of debt, refinancing risk, occupancy/WALE, and DPU trend — these often determine whether income remains stable.

About the Author
HenryT is a Fellow Chartered Accountant (FCA) based in Singapore and the writer behind The Accounting Investor. He combines professional accounting training, corporate finance experience and personal dividend investing to help everyday investors read financial statements with confidence.

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Disclaimer

This article is for education and general information only. It does not constitute investment, legal, tax or any other form of professional advice, and it is not a recommendation to buy, sell or hold any securities mentioned.

My sole intent is to help readers learn how to read financial statements and think more clearly about businesses. Please do your own research or consult a licensed financial adviser before making any investment decisions. I may or may not hold positions in the securities discussed at the time of writing and am under no obligation to update this article.