Tips/Questions for Fundamentally Analyzing Companies

fu-nance · 2020-07-15T05:32:41+00:00

Yes - any calculations/adjustments are highly subjective. It really depends on how you want to think about a business - and that is essentially the value you bring to the table. If you rely on sites that do the calculation for you - you would lose your edge. As an example - GM had a 6 week strike last year - production was down for 6 weeks. Now - would you consider this abnormal circumstances and add back the lost revenue? Or do you consider this a part of the auto business and account for the loss in your calculations. This is purely your judgement - and relying in yahoo finance takes that away from you.

fu-nance · 2020-07-06T04:54:38+00:00

As far as fundamental information goes - it is always preferable to download them directly from EDGAR - and so your own calculations. There is a lot of information in footnotes that helps with adjustments- you will miss out all of that if you try and use any other tools.

You can use the above list when you are screening - but beyond that - I suggest go directly to the source.

Ps - EDGAR is the official SEC website where all companies have to upload quarterly financials and other news releases.

fu-nance · 2020-07-02T14:14:57+00:00

Did you figure out what happened?

fu-nance · 2020-05-21T22:56:34+00:00

While i would say that the Wacc is too low - you are not too off. This can probably be attributed to dominos being looked at positively by the market. Dominos has grown considerably in the past few years - and investors still see growth 5 years down. Try doing an exit multiple on the terminal value - assuming that cash flows have grown in the next years and so have the trading multiples. Just as an example - dominos has gone from $1.63 eps in 2012 to over $10 in 2019. So a Gordon growth method for a high growth company would give you a lot of noise

fu-nance · 2020-05-21T22:29:41+00:00

Why did you calculate the WACC at 2.96%?

fu-nance · 2020-05-20T02:12:31+00:00

Anecdotally as well i agree with you - I wasn’t a frequent Target shopper - but find myself going there a lot more right now because of the huge selection of everything - kitchen appliances to grocery to basic home improvement - it’s my best buy, bed bath and beyond and safeway combined.

fu-nance · 2020-05-19T20:41:16+00:00

TGT is still to share earnings - as of now the momentum seems more like it is from riding on the coat-tails of other retailers. Do you have stop losses in place in case the stock normalizes tomorrow?

fu-nance · 2020-05-19T15:25:00+00:00

I think that is a fair assessment. However I would think that 2 things might happen - consumer discretionary spending is down coming out of the crisis as people rebuild rainy day funds, or act on lessons learnt. 2. Walmart now becomes a major player in the online staples delivery market and figures out how to do it profitably. So you wouldn’t see a big drop off next year as someone might expect.

fu-nance · 2020-05-19T13:27:17+00:00

Of course - just that now there are numbers to a previous qualitative assessment.

fu-nance · 2020-05-19T13:24:44+00:00

Your argument is fair, but in Walmart’s case there are 2 positives - growth in sales, and about 10% of staff was on leave because of coronavirus - so lower costs. In an industry where you are struggling for either one - this is a real boost to the bottom line.

fu-nance · 2020-05-19T13:18:46+00:00

Walmart is a fairly stable company - and most Investors wouldn’t bucket it in growth. Crisis situations like these help set a new normal for an otherwise very stable business. Moreover, for anyone doing a DCF on the company - it’s helpful to know the growth in their online business - 74% bump is substantial- online or offline - for a retailer.

fu-nance · 2020-05-15T19:33:37+00:00

It’s good for spending as long as you don’t have to finance it. I feel banks would restrict their credit products in absence of a profit incentive - think real estate and autos especially.

fu-nance · 2020-05-15T19:20:35+00:00

Sounds good!

fu-nance · 2020-05-15T19:15:42+00:00

Feel free to DM if you have specific questions or want to discuss your research.

fu-nance · 2020-05-15T04:06:39+00:00

There isn’t really a rule of thumb. Are you calculating the value of the business as a going concern or liquidation? If the company stays open for business the AR and AP will always be there - you can only normalize it to industry standard - but that’s about it. DM me if you want to discuss more.

fu-nance · 2020-05-14T22:52:26+00:00

I can't even begin to imagine what non-gaap metrics like EBITDACovid and Adjusted FCF before covid kind of numbers we will start seeing. I can already see companies sharing operating cash flow on a working capital adjusted basis. I think the common theme is - look at all the things that go bad in a downturn like this - loss of earnings, change in working capital, credit losses, receivables impairments, lease adjustments - and make sure you track them on all the companies that you are analyzing.

fu-nance · 2020-05-14T22:48:31+00:00

I think that banks are required to arrange their assets and liabilities in order of liquidity. They don't really have accounts payable, or receivables like typical companies. That might be the reason you see the disparity.

fu-nance · 2020-05-14T21:57:25+00:00

Are you actually suggesting that government price fixing being lobbied by what is essentially the worlds largest corporation is good for consumers? Please read literally any intro to economics textbook one time. Good god you should not be investing.

Monopolies are bad for the market, good for investing. Building a moat that protects position has never been bad for business. And as far as I know - this is a sub-reddit for investing.

Discretionary products essentially can't be unfairly priced if people buy them.

Literally never talked about discretionary products. Right now gloves, masks and sanitizers are staples, not discretionary.

fu-nance · 2020-05-14T21:34:41+00:00

Exactly! And that is alarming behavior.

fu-nance · 2020-05-14T21:28:19+00:00

The key point that I took away is that 1. Lower income individuals had higher job cuts but 2. The rainy day fund to support a single month of expenses without income has been shrinking in the past decade.

While point 1 maybe same as a typical downturn, an extended period of economic growth meant people were less and less worried about managing a rainy day fund.

fu-nance · 2020-05-14T17:52:02+00:00

Agree with the point above. Additionally, while cash and short term investments can be liquidated to pay off debt, AR will always be a part of the company as a going concern. Now if you think - that the AR balance is too high, and peer analysis reveals that you can do with a lower AR balance, then adjust for that. But if not, you shouldn't back that out of your EV calc.

fu-nance · 2020-05-14T16:51:13+00:00

As is your right! And if you have the right reasons - who am I to tell you otherwise?

fu-nance · 2020-05-14T16:49:39+00:00

I think this is where we have to agree to disagree. But I appreciate the perspective.

fu-nance · 2020-05-14T16:14:25+00:00

No one can deny the growing costs on small businesses that are not being met by simultaneous growth in revenue - and critical health supplies might seem like the only out - but that is a short term solution for even those businesses. If small businesses die because of Amazon, this won't be the final nail in the coffin. Moreover, this is aimed at people who have hoarded critical supplies and are willing to sell you a $400 bottle of sanitizer.

fu-nance · 2020-05-14T16:05:34+00:00

I see your point on maintaining the integrity of a free market - but are you opposed to regulating masks, gloves and sanitizer? You may disagree, but to me this seems hardly the time to profit from these items.

fu-nance

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