Analysis Part I
There are almost endless theories and models of stockmarket analysis... macro models, micro models, models based on economics, models based on market psychology, even models purporting to be correlated to the shortness of womens skirts*!
At wise-owl.com we have observed a few...
After a while you notice how well (or not so well) different theories actually work. Probably not a surprise that most of them seem to work pretty sporadically.
We base our assessment of stockmarket opportunities on two analytical models: Fundamental Analysis and Technical Analysis. This section is designed to give you an introduction to the fundamentals of Fundamental Analysis.
Fundamental analysis involves identifying the 'value' or 'growth' proposition of a stock using a range of methods. This approach endeavours to understand the fundamental drivers of this stock, analysing factors such as the company's operations, the market in which it operates and general economic issues, in order to understand the stability and growth potential of a company.
Wise-owl.com has developed a quantitative approach, much like a 'health check' that looks for certain characteristics of out-performing stocks such as:
* an experienced management team
* strong cash flows and profit margins
* attractive financial performance ratios
* sector comparisons
The balance sheet can provide a measure of historical performance on key quantitative data that we use to analyse the stock. Historical performance is often compared against the current performance to pick up any signs of 'out performance'.
Every stock has a different story and the key share price drivers identified in the fundamental & quantitative analyses determine whether it is a growth or value story.
Some of the key factors addressed in our reports include:
Revenue & Profitability
All revenue & profitability calculations are based on the last 3 years of available data.
To fully comprehend and accurately analyse the data included in the Revenue & Profitability table, it's important that you understand the terms of each entry.
How each of the elements that make up the Revenue & Profitability table are calculated, and hints on how to track figures over the 12-month are summarised below.
A comparison against the sector is the last fundamental analysis undertaken to determine the stock's value. In our reports we summarise key ratio's and performance indicators, compared to the sector average on rolling 12 month period.
Ratio Calculations and indicative behaviours
A few of the most common key ratio's, how they are calculated and some 'hints' they may indicate are,
To see our approach first hand, click here to register for a complimentary trial to our Equities Report.
* There was a theory published some years back that drew the rather startling findings that the shorter women's skirts were, the more optimistic the prevailing social mood was, and hence the more 'bullish' the market was likely to be. We here at wise-owl.com have not put much stock in this...