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zyreon
23-08-2007, 07:08 AM
Hi

I just threw a tutorial together on financial statement analysis, it is basically an explanation of the analytics section of the new report format on my website, but it's got some good stuff especially if you're wanting to learn about financial analysis.

the link is: http://www.smallcaps.co.nz/v2reportexp.html

enjoy.

And as always if you have any suggestions about the new report let me know.

cheers,
Callum

Serpie
23-08-2007, 09:05 PM
Just having a look at your website. Great resource.
Very much looking forward to meeting you at the Auckland meeting.

Crypto Crude
23-08-2007, 09:45 PM
zyreon,
In relation to small caps... do you not think that financial analysis is abit pointless... most of those stocks dont have revenues and/or there aint nothing to analyse..(in terms of cashflow)...
I rather like what yourve done with the smallcaps site...
are you investing in tasman?
:cool:
.^sc

thereslifeafter87
24-08-2007, 11:00 AM
You shouldn't be investing in it unless it has revenues and profits - unless of course it is an explorer with a good shot at finding what it's looking for and massive potential upside.

Crypto Crude
25-08-2007, 02:26 PM
thereslifeafter87 You shouldn't be investing in it unless it has revenues and profits - unless of course it is an explorer with a good shot at finding what it's looking for and massive potential upside.


mr 87,
small caps/specs usually donot have revenues or profits...

I donot look for investment that fits what you have said... Im looking at oil stocks which are after discovery and before production, these are where the big returns are at....(more favourable risk return)...
if current production/ and or a drill come then they are just a bonus...
investing in development can be the most rewarding form of investment in this industry...cue has multiple developments and I rate it.....
:cool:
.^sc

mccollr
25-08-2007, 04:20 PM
Well done Callum
Great site. Plenty of information for those new new to this game.

zyreon
27-08-2007, 07:09 AM
there's actually a lot of companies under 50m market cap with financials worth analysing... if you look at the tables section over 40 actually turned a profit in the most recent year.

there are a number which don't make money, and some of which will never make money, and if it's a part of your plan then you can go right ahead and invest in them. But there are some good profitable small companies that are worth looking at.

mccollr
11-09-2007, 07:27 PM
A handy Kiwi site for research on ASX and NZX stock and only $30 per year.
http://www.whatbusiness.co.nz (http://www.whatbusiness.co.nz/)

thereslifeafter87
12-09-2007, 09:58 AM
mr 87,
small caps/specs usually donot have revenues or profits...

I donot look for investment that fits what you have said... Im looking at oil stocks which are after discovery and before production, these are where the big returns are at....(more favourable risk return)...
if current production/ and or a drill come then they are just a bonus...
investing in development can be the most rewarding form of investment in this industry...cue has multiple developments and I rate it.....
:cool:
.^sc

That approach is fine for a small portion of your portfolio, but investing in explorers is inherently risky. You still need to know the basics of financial statement analysis in order to determine whether the company has enough funding to continue its exploration program, or will need to go back to the market cap in hand, thus diluting your interest and your returns.

There are plenty of companies on the ASX with under $100m market cap, that make profits and are growing quite quickly. You need financial analysis here to avoid the dogs - companies that manipulate earnings, include one-off transactions in earnings, capitalise R&D, and have other issues with their business model that require some digging to uncover (eg: BCF).

Crypto Crude
12-09-2007, 01:54 PM
thereslifeafter87-1....That approach is fine for a small portion of your portfolio, but investing in explorers is inherently risky. You still need to know the basics of financial statement analysis in order to determine whether the company has enough funding to continue its exploration program, or will need to go back to the market cap in hand, thus diluting your interest and your returns.

2....There are plenty of companies on the ASX with under $100m market cap, that make profits and are growing quite quickly. You need financial analysis here to avoid the dogs - companies that manipulate earnings, include one-off transactions in earnings, capitalise R&D, and have other issues with their business model that require some digging to uncover (eg: BCF).


mr 87,
1.... I usually never invest in stocks that have low cash levels, unless im in for a short term trade...oilers that I mainly invest in have no problem raising cash after discovery, and they raise enough to get them through to first production...my strategy is usually to get in during Development stage when all the cash has been raised...I have found that comparing ratio analysis to industry averages etc are a waste of time... working through other financial performance ratios are a waste of time IMO at that stage in the oil cycle... I cant speak for those stocks on smallcaps, and for blue chips, large stocks financial analysis is very important, and I havenot yet invested in a large stock... I speak from an oiler perspective only...

2.... I think that it is as important to have financial analysis as it is to have a good sense for which projects to take on and therefore which companies to invest in... its all about finding projects that have (NPV>0)... all the financial analysis will fall into place if your project stacks up...and financial analysis doesnot come into play until after production has commenced...

It all depends on what industry you are investing in, and other industries im sure it is much different to how I see it...
:cool:
.^sc

zyreon
16-09-2007, 08:34 PM
Hi

Financial analysis - in terms of ratio analysis is basically a way of quickly assessing the historical financials of the company. You can immediately sort the profitable companies from the loss making companies, so on a backward looking basis you can weed out companies in weak financial positions.

The future financial position is the real key though, and forecasting cash flows or dividends is a key input to classical valuation models such as DCF/DDM. So much more when the company at hand has no current earnings - I'm currently reading a book "The Dark Side of Valuation: Valuing old tech, new tech, and new economy companies - Aswath Damodaran" it's a pretty good book, focuses on how to value the tech companies and places particular emphasis on the tech/dot.com boom.

There is a real challenge in using normal NPV analysis when the company is in a new business with no comps, and when the business model is unproven and current FCF/earnings are negative.

This applies to some of the newer/start-up companies, however not all small caps (in this case market cap less than $50m) on the NZX are start-ups with no operating history -quite a few are well established e.g. operating since 1875 (CBS)... indeed the classical financial analysis is just fine for those that are essentially established businesses.

I would admit though that simple ratio analysis is only one aspect of financial analysis and I will be working on putting together some form of standardised financial models to come up with some valuations/forecasts/wacc analysis.

Will post any breakthroughs and developments as they occur

cheers,
Callum

Fred114
17-02-2013, 01:58 PM
Just to continue this post now five years old, Aswath Damodaran is a celebrated teacher on corporate finance in the US, now at Stern School of Business at NY University. He was profiled as one of the top twelve business professors by Business Week in 1994. His comprehensive website opens access to the resources he uses in his class. http://pages.stern.nyu.edu/~adamodar/ which includes large datasets for valuing companies in all major markets.

Hoop
19-02-2013, 08:40 AM
Just to continue this post now five years old, Aswath Damodaran is a celebrated teacher on corporate finance in the US, now at Stern School of Business at NY University. He was profiled as one of the top twelve business professors by Business Week in 1994. His comprehensive website opens access to the resources he uses in his class. http://pages.stern.nyu.edu/~adamodar/ which includes large datasets for valuing companies in all major markets.

Thxs for the re focus Fred....I've overlooked this thread...Had a quick look at the spreadsheet section....must come back to check this site out when time allows...looks very interesting ..eh

Fred114
17-12-2014, 07:36 AM
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/invphilcourse/invphillect.htm

Investment Philosophy