Have you ever tried to read a financial statement of a company? You see some very big numbers, do they seem great?
The truth is, that's not always the case. Big numbers might not look that great if you factor in some other indicators, or if you compare them with the results of another company. In other words, without putting things in perspective, it's hard to know the numbers are good or bad.
Financial results can be hard to understand or measure when looked at from an isolated standpoint. Our ratios put the core information in perspective: we relate financial results with stock price, dividends and other parameters, and then compare these ratios to other companies or groups. This allows us to find out which company is performing better or worse than another.
It is important to remember that our analysis only looks at the past. When taking decisions, the investor must consider the present and the future.
The Market indicator tracks the performance of the biggest US public companies.Standard & Poor is a company that provides financial information and analysis. They created an index to track the 500 biggest US public companies, which is called S&P 500. A few examples of companies that are part of this index: Apple, Amazon, Coca-Cola, ExxonMobil. We use the S&P 500 companies to calculate our Market indicator.
The Market indicator provides a good base of comparison for the other stocks. It helps answering the question: did a stock outperform or underperform the market?
A public company, or publicly listed company, is a company whose shares are available for acquisition to the general public, in a stock exchange or in over-the-counter (OTC) markets. Some examples of public companies are: Apple, IBM, Toyota.
These are the two main stock exchanges in the US:
Shares represent a piece of ownership in a company. The terms stocks and shares have a very similar meaning today and can be used interchangeably.
How much one share represents depends on how many shares are available. That's why one can't simply compare prices of one stock unit of different companies to know which share is a good deal. The best way to compare shares is observing the companies performance per share.
A company can have multiple classes of shares, with different characteristics.
Usually the classes of shares are identified by a symbol, or ticker. For example, these are the symbols of a few popular companies:
Every financial quarter, public companies have to disclose their financial results to the public. We, then, digest that financial information and calculate our indicators. Our service uses multiple 3rd party providers to amalgamate the data we need.
There are different ways to calculate the same indicator. In most cases, we use a trailing 12 months value for each variable used in our calculations. For some values, we use an adjusted amount.
Companies release their financial results every quarter, which means every 3 months (12 months divided by 4).
Unfortunately, companies can choose the date when their financial year should end, which is a great source of confusion. They don't always synchronize with calendar years. For example, Apple (AAPL)'s financial year ends in December, but Nike (NKE)'s ends in May.
Because of that, quarters are not in sync, so companies have data points in different dates.
We keep recalculating information based on data updates and corrections. For cohorts, such as Market (S&P 500) or Peers, we might recalculate past values when there is a change in members of the cohort.