Earnings season is full of problems for investors. If a company doesn’t meet analysts’ expectations, you can expect its stock to fall.

But there’s another concern… one most investors don’t pay attention to.

What should you do if a company you’re watching does beat estimates? Should you take that as a sign to buy?

Some traders might suggest you do just that. But for anyone looking for a long-term investment, an earnings “beat” could be the exact wrong time to get in.

Take Fitbit Inc. (NYSE: FIT), for instance. 

Fitbit is one of the hottest stocks of the year. The maker of active, wearable tech launched its IPO this summer at around $30 and almost immediately spiked to $50.

Yesterday, after the closing bell, the company announced its third-quarter earnings. It raked in 19 cents per share in earnings compared to the Street’s average estimate of 10 cents per share. 

Many investors saw those results and bought. Those investors might already be sitting on a loss. The stock fell 8.55% on November 3.

You see, along with better-than-expected earnings, the company also announced that it was going to sell additional shares on the open market. In other words, shareholders that bought this summer will see their ownership stake in the company fall.

This is a good reminder to check the details of an earnings announcement out before you make a move based on the headline numbers.

But even if a company beats earnings, has no ugly hidden story in its release and continues to have a positive outlook, you should still be careful.

Case in point: Clorox Co. (NYSE: CLX).

Clorox is and has been one of my favorite companies to own for the long term. The company makes products people both love and need. Even if the economy falls into a deep recession, people will still clean their kitchens and bleach their whites. 

But loving a company doesn’t always mean you should own its stock.

On November 2, Clorox reported third-quarter earnings of $1.32 per share. That’s a full 12% higher than the $1.18 per share analysts were estimating. 

Shares of CLX jumped 3.1% after it reported. That’s great, right?

Despite loving the company and its products, I’m convinced that the stock is completely overbought right now. Sure, earnings have grown, but not enough.

Even with its better-than-expected quarterly growth, Clorox only expects its full-year earnings per share to fall in the $4.68-$4.83 range. That means it is trading at an incredibly high 26 times its 2015 earnings estimate. 

To put that in perspective, Clorox typically trades at about 21 or 22 times its earnings. Based on that, you’re looking at a 19% premium. So if its stock reverts to its historical trading range after the hysteria of its recent earnings beat is over, you could be sitting on a substantial loss.

That’s the kind of risk that’s not often talked about during earnings season. 

When It’s Time To Buy…
Of course, there’s a flipside to earnings surprises. An already beaten down stock that misses estimates can turn into a great buying opportunity.

A great example of this is Emerson Electric Co. (NYSE: EMR). 

Like Clorox, Emerson is a large, blue-chip stock that should be considered for any long-term investor’s portfolio. But unlike Clorox, traders hate it.

Emerson makes everything from power storage devices to large-scale drilling equipment for the oil and gas industry.

And as you might guess considering its customer base, it is struggling. With oil and gas production forecasts in the dumps due to lower energy prices throughout this year, the company has seen its bottom line fall. 

To make matters worse, in its most recent quarter, it performed even worse than the already-reduced estimates on Wall Street. Emerson’s most recent quarterly earnings per share were just 93 cents. That’s four cents lower than the expected 97 cents analysts projected for the quarter.

Here’s where it pays to look at the details. The company’s stock actually jumped modestly since its announcement — on this news.

The reason is because of its restructuring program. It’s working. Even though the company disappointed this earnings season, it now expects cost savings from its recent restructuring program to help the company actually reach its full-year earnings estimates.

And because of its already-beaten-down share price, long-term investors are actually looking at a deal here. Based on its historical valuations, the company could be as much as 20% underpriced. 

Ignore The Headlines
So you have Fitbit falling even with a better-than-expected quarterly number. You have Clorox rising on its own earnings beat, even though shares are already overbought. And you have Emerson rising on a missed quarterly number. 

It just goes to prove that you can’t look at what the headlines say. It doesn’t matter if a company does better-than-expected or worse-than-expected in any giving quarter. The only real way to invest for the long term is to dig deeper into how the company is doing and how expensive its stock is trading.

In other words, don’t trust earnings season.

Editor’s Note: You don’t have to trust earnings season to make a killing from it.  Our colleague Jared Levy says this earnings season is about to get “crazy” — and some investors will make a fortune while others will lose their shirt. That’s why Jared and his followers are using a little-known “algorithm” to make profits of 20% in 5 days, 70% in 12 days and even 123% in 43 days — regardless of which way stocks move. To learn more, click here.