Tony Boden concludes his series on valuing companies and suggests some sites to visit when you're looking for data.
So far in this series I have given a very brief view of some of the ratios you will want to consider when attempting to value companies based on their ‘fundamentals'.
Of course, to put any of this into practice, you really need to know where to get the data to calculate these ratios and I will fill that gap now.
Perhaps the most basic source of information is the daily newspapers, many newspapers provide daily tables of share prices together with the historic P/E ratios and Dividend Yield percentages. These tables can provide a useful at a glance view of these key ratios, but there are a number of drawbacks :
- These give historic data only, whereas you may be more interested in forecasts.
- It is not easy to tell how up to date (or accurate) this data is.
- There is usually no information on asset values and debt.
- Only a limited number of companies are generally covered.
An improvement on the basic newspaper summaries is to use an online "stock screener" such as that provided by digitallook. These tools generally provide access to many more financial ratios than the company. They allow you to create shortlists of companies by filtering the data (for example to list all companies with a PE ratio less than 15 and a PTBV ratio less than 1)
Stock screeners are very powerful tools, but they still only provide part of the answer.
From time to time the data they are based on will be inaccurate, whilst this may be comparatively rare, when you are making investment decisions based on the information, even a single error can be costly. What's more, you will only get data from the screeners, you will probably want to understand more detail and background.
For each half year and full year the company will report its relatively detailed results to the stockmarket via a Regulatory News Service announcement. You can access these statements from here.
You will see all statements made by the company to the market including trading statements, significant contract wins and also a useful recent innovation, statements of total voting rights which give an up to date view of the number of shares in issue. This is important information when for example converting the share price into the total market valuation of the company.
Results data provided via RNS should be pretty reliable and detailed, but there is a yet further level of detail available the company's Annual Report. This has the benefit of providing audited information and also often provides additional detail about what makes up the earnings or what makes up the assets. This kind of information could, for example, help you understand whether the company's fixed assets are primarily property, which is likely to hold its value, or machinery which probably won't.
In most cases you will be able to find a company's latest Annual Report from the Annual Report link on TMF's quotes page. Alternatively why not try the company's own website (a search for the company name should locate this) where you will often be able to download the reports for the last few years.
So in conclusion, in this series I've provided a brief overview of some of the factors you may consider when valuing a company and where to get the data from. Where do you go next?
Well there is no substitute for experience, so why not have a try at applying some of these ideas to a company of your choice? You might want to post your analysis on the TMF's discussion boards where you are likely to get feedback which will help to understand whether you have made any mistakes or omissions. You will also likely get useful feedback on other things to consider about your chosen company.
Also you can never know enough and you might want to build on this grounding in company valuation. There are links to several other useful TMF articles at the bottom of this feature.
Happy Investing!
How To Profit From Shares | How, When And Where To Invest | Help For Investing Beginners | How To Value Companies Part 1
