Say for example that Nestron Incorporated sold off its international division during the quarter and booked a huge profit, which in turn, made the bottom line results look really strong, when in fact, the asset sale really had nothing to do with the day-to-day operation of the business. The same distortion would apply if the company had posted a large one-time loss too, which is why many investors and analysts feel a so-called "ex-items" number is a better measure of how things are going.

Companies know this and have gotten very creative at finding ways to ''dress up'' their numbers and put them in the best light. Another area to be mindful of is which number is the Wall Street consensus estimate based off of. If you're cheering strong net income, but traders are reacting poorly to an ex-items result, you're going to get hurt.

The Top Line: Since the top line, or sales/revenue comes first on the income statement, many investors prefer it, solely because it tends to be pristine. "You need to be careful, because what investors tend to do is they tend to fall in love with companies where the revenues are skyrocketing."

That's a problem because people don't pay attention to how much they are paying for that growth and end up paying a lot for every dollar of sales or earnings. Years of research and experience taught him that "what you're paying for something is more important than what the actual earnings or sales growth number is."

Guidance: The expectations game or the crystal ball is, arguably, even more important for investors than the top or bottom line.

"The reason many companies give guidance is they want analysts to make it their forecast for earnings," because they want to be as close to what the expectations are on Wall Street, and in a perfect world, beat them by a smidge. At the same time, he says companies that don't give guidance are "playing a much riskier game" as they are leaving analysts to their to own devices.