The search for a new object for investments in the securities market is a constant labor- and time-consuming process. However, there are not so few shares on the Russian Federation market, but in the near future a significant number of money blogs arose, filled with reviews of the organization from Russia and the study of financial statements. If someone writes about foreign stocks, it almost always refers to dividend aristocrats or stocks from prestigious sectors: biotech, technology and semiconductors. In a word, in Russian society, the analytical support of American securities is not sufficiently developed.
However, what to do, if you do not want to limit your own investment choice to those stocks, who are heard? Of course, that you have to follow the advice of Warren Buffett and learn annual reports, starting with the letter "A". But it will take a long time, particularly, if for you it is necessary to conduct a study at once a "pack" of companies (for example, from the 1st sector) and for each carefully review the annual report… Naturally, reading similar documents can be very educational, in some cases, you can even completely revise your attitude to certain actions, that occur in the global economic system. And if, as a result of studying the annual report, you come to the conclusion, that the company is not worth your investment? Lost time can't be returned!
I will tell for you, how I save time when researching American issuers and immediately discard unsuitable options.
We study the monetary characteristics of the company
At the first step of getting to know the company, I collect a summary of monetary characteristics for the past 5 years. To this end, I go to the sec.gov website - the Company Filings section - and go to the page for disclosing the corporate information of the company I am interested in.
Rice. 1. Main page sec.gov Fig. 1. Main page sec.gov
On the issuer's page, I filter on 10-k annual reports, and for the latter 5 open in a new browser tab Interactive Data.
Rice. 2. Opening annual reports on sec.gov Rice. 2. We open annual reports on sec.gov
If you click on the Document key, then the text version of the report will open, but it is not needed yet. Pressing the Interactive Data button will open the balance sheet, report about incomes and material losses, money flow report and others. All these forms can be found in the Financial Statements section.
Rice. 3. Access to forms of monetary reporting Fig. 3. Access to forms of monetary reporting
Now, when all the financial statements for the past years are at hand, Filling out a spreadsheet in Excel.
Rice. 4. An example of a summary of the issuer's monetary characteristics for the past 5 letRis. 4. An example of a summary of the issuer's monetary characteristics for the past 5 years
I fill in the characteristics of the debt for the last reporting year. ROE characteristics, "Capitalization", "Earnings per share", "Unsullied Debt", "Debt / Profit" (this indicator is calculated based on the data of the last reporting year) are calculated automatically. The share price in the nameplate is indicated at the end of the respective fiscal year. The number of shares can be viewed in the Cover section.
Rice. 5. Checking the number of shares outstanding Fig.. 5. See the number of shares outstanding
Dividend per share is reported very rarely in cash statements., so you have to find this data on third-party resources. For this purpose, I usually study the website of the issuer or the company card on the website investing.com. With all this, investing.com immediately indicates the dividend efficiency of the stock.
To understand the exchange rate dynamics of shares, we are not limited to prices at the end of the fiscal year, see also schedule shares over the past couple of years. This is where investing.com comes to the rescue again., on the timeframe of one month, the dynamics for the past 5 years.
Rice. 6. Stock chart on investing.com Rice. 6. Share chart on investing.com
At this step, collecting data on the financial condition of the company can be considered completed..
Interpretation of the acquired results
Looking at the stock chart for the last five years, you may already be unwilling to disassemble the company in detail. If you did not see anything suspicious on the chart, then you can analyze the numbers in the generated table. For greater clarity of the result, based on the collected data, I build the appropriate diagrams.. I also insert a stock chart on the chart sheet., copied from investing.com, - for completeness.
Rice. 7. An example of constructed diagrams Fig.. 7. An example of plotted diagrams
The obtained graphs clearly show, how the financial performance of the company in question has changed: how big is the margin of operating and net profit, return on equity, equity is accumulated or wasted, how expensive is the company, it develops or stagnates / degrades. Also displayed, how the company manages its equity: whether it conducts buybacks or additional issues. With sufficient experience in analyzing such diagrams, you will immediately see, whether there is abuse of buybacks. One of these signs is that retained earnings significantly exceed equity..
The combination of earnings per share and the amount of dividend paid on one diagram clearly shows, how much of the profit goes to dividends - payments do not burden the company or it is struggling to preserve its dividend history.
If, after studying the constructed charts, you still have a desire to study the issuer in more detail, then you can already start reading the 10-k form for the last reporting year.
My experience shows, that it takes about ten minutes to fill out a financial data sheet, of which two or three are spent on searching for dividend history and copying the stock chart in Excel.
In this article, we looked at the example of Exxon Mobil (XOM). After studying the constructed diagrams, I would come to the conclusion, that the company is "somehow not very", and start studying another. I will give reasons against buying HOM shares.
- Operating margin is too low (less 10%), net profit margin is also quite small.
- Return on equity consistently lower 15%, while the company is valued at about one and a half capital.
- A significant part of net profit is directed to dividends.
- Equity is significantly less than retained earnings. Maybe, have been abused by buybacks in the past.
- Revenue in recent years has been approximately at the same level - the company is clearly stagnating. The exchange rate dynamics of stocks reflects this process..
As you can see, spending just ten minutes, you can draw quite a few conclusions about the current state of affairs of the issuer.
