The process of putting an analysis down in writing can be instrumental in making sure as many stones as possible have been turned over when researching a company. Famed investor Peter Lynch, who's credited with coining that phrase, has also been quoted as saying that “the person that turns over the most rocks wins the game. And that's always been my philosophy.” Below is an overview of the major sections to consider when writing a 澳洲幸运5官方开奖结果体彩网:financial analysis report on a company.

Company Overview

A report should start with a description of the company in order to help investors understand the business, its industry, its motivation, and any edge it might have over its competitors. These factors can prove invaluable in helping to explain why a company might be a profitable investment or not. A firm’s 澳洲幸运5官方开奖结果体彩网:annual report, 10-K filing or 澳洲幸运5官方开奖结果体彩网:quarterly 10-Q with the 澳洲幸运5官方开奖结果体彩网:Securities and Exchange Commission (SEC) provide ideal starting point🤪s; it is surprising how rare it is for industry experts to refer to original company filings for important details. More valuable detail can be🦂 obtained from industry trade journals, reports from key rivals, and other analyst reports.

To also capture key fundamentals to describe a company, look to Michael Porter. The 澳洲幸运5官方开奖结果体彩网:Porter’s Five Forces model helps explain a company’s place within its industry. Specifically, the factors include the threat for new entrants entering the market, the threat for substitute products or services, the extent to which suppliers are able to influence the company and the intensity of rivalry among existing competitors.

Investment Thesis

The motivation for a bullish or bearish stance on a company goes into this section. I♉t can come at the top of a report and include parts of a company overview, but regardless of its position, it should 𒊎cover the key investment positives and negatives.

A 澳洲幸运5官方开奖结果体彩网:fundamental analysis, which can also be broken out into its own section, contains research on the firm’s financial statements, such as sales and profit growth trends, cash flow generation strength, debt levels and overall 澳洲幸运5官方开奖结果体彩网:liquidity, and how this compares to the competition.

No detail is too small in this section; it can also cover efficiency ratios like the primary components in the 澳洲幸运5官方开奖结果体彩网:cash conversion cycle, 澳洲幸运5官方开奖结果体彩网:turnover ratios, and a detailed breakdown of 澳洲幸运5官方开奖结果体彩网:return on equity components, such as the 澳洲幸运5官方开奖结果体彩网:DuPont identity, which will 澳洲幸运5官方开奖结果体彩网:break🐲 ROE into three to five different 🍨metrics.

The most important component of analyzing past trends is to synthesize them into a forecast of the company’s performance. No analyst has a crystal ball, but the best ones can accurately extrapolate past trends into the future, or decide which factors are th𒁏e most important in defining success for a company going forward.

Valuation

The most important part of any financial analysis is to come to an independent value for the stock and compare this to the 澳洲幸运5官方开奖结果体彩网:market price. There are three primary 澳洲幸运5官方开奖结果体彩网:valuation techniques:

1. The first and arguably most fundamental technique is to estimate a company’s future cash flows and discount them back to the future at an estimated 澳洲幸运5官方开奖结果体彩网:discount rate. This is generally referred to as a 澳洲幸运5官方开奖结果体彩网:discounted cash flow analysis.
2. The second is called 澳洲幸运5官方开奖结果体彩网:relative value, where the 澳洲幸运5官方开奖结果体彩网:fundamental metrics and valuation ratios (澳洲幸运5官方开奖结果体彩网:price-to-sales, 澳洲幸运5官方开奖结果体彩网:price-to-earnings, P/E to growth, etc.) are compared to competitors. Another comparison analysis is to look at what other rivals have been bought out for or the price paid for an acquisition.
3. The third and last technique is to look at 澳洲幸运5官方开奖结果体彩网:book value and try to estimate what a company might be worth if broken up or 澳洲幸运5官方开奖结果体彩网:liquidated. A book value analysis is especially insightful for financial sector stocks, for instance.

Key Risks

This section can be part of the bull/bear story in the investment thesis, but it's meant to detail key factors that may derail either a bullish or bearish stance. The loss of patent protection for a 澳洲幸运5官方开奖结果体彩网:blockbuster drug for a pharmaceutical company is a great example of a factor that can weigh heavily on the valuation of its underlying stock. Other considerations include the sector in which the firm operates. For example, the technology industry is marked by short 澳洲幸运5官方开奖结果体彩网:product life cycles, which can make it hard fജor a firm to keep its edge fol💙lowing a successful product release.

Other Considerations

The above sections could prove sufficient, but depending on the stones uncovered during a financial analysis, other new sections might be warranted. Sections covering 澳洲幸运5官方开奖结果体彩网:corporate governance, the political environment or nearer-term news flow, might be worthy of a fuller analysis. Basically, anything important that can impact the 澳洲幸运5官方开奖结果体彩网:future value of a stock should exist ᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚsomewhere within the report.

The Bottom Line

The performance of the 澳洲幸运5官方开奖结果体彩网:underlying company is most certainly to drive the performance of its stock or bonds in the future. Other 澳洲幸运5官方开奖结果体彩网:derivative securities, such as futures and options, will also depend on an underlying investment, be it a commodity or a company. Figuring out the key drivers to the performance of a stock and putting it down in writing can be an invaluable endeavor for any investor, regardless of if a formal 澳洲幸运5官方开奖结果体彩网:research report is needed.