Financial analysis

[zyreon]

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]

Just having a look at your website. Great resource.
Very much looking forward to meeting you at the Auckland meeting.

[Crypto Crude]

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?

.^sc

[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.

[Crypto Crude]

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.....

.^sc

[mccollr]

Well done Callum
Great site. Plenty of information for those new new to this game.

[zyreon]

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]

A handy Kiwi site for research on ASX and NZX stock and only $30 per year.
http://www.whatbusiness.co.nz

[thereslifeafter87]

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.....

.^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]

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...

.^sc