Analysis of Financial Statements Worksheet

Use the worksheet below to determine if a company has the coveted Durable Competitive Advantage. Calculate the ratios and equations using the values found in the company's financial statements. Read everything and anything about the company. Understand its business and how it makes money. We also prefer to invest in companies that pay dividends.

 

Introduction

The Rundown:

 

 

Basic Information
Company Name Ticker Symbol
Date of Analysis Value of Investment

 

Weight of the Investment
Large Mid-Size Small

 

Understand the Business

What does the company do and how does it make money?

 

 

Is the company well known or has a brand name?

 

 

Does the company pay dividends?

 

 

 

Determine if the Company has Good Management

Who is the CEO and Chairman of the company? Who are its Board Members?

 

 

Is the CEO, Chairman, and Board Members smart? Are they dumb? Are they innovative and productive? Or are they old and obsolete?

 

 

Google or find YouTube videos of the CEO, Chairman, and Board Members. Do you like their face? Is your gut feeling about them good or bad?

 

 

Does the company's management look out for the interest of shareholders? Or are they greedy and they are in it for themselves?

 

 

 

Check Mark the Durable Competitive Advantage Characteristics of the Business

Durable Competitive Advantage Characteristics of the Business
Sell a product or service that is a basic necessity Is in an industry with very little competition
Sell a unique product that doesn't change much Provides a unique service that's difficult to replicate
Is the low-cost buyer and seller of products the public constantly needs Spends very little or none at all on research and development

 

Look for a Durable Competitive Advantage Using the 10 Year Summary

10 Year Summary
Year Revenue Net Income Earnings Per Share Retained Earnings
1
2
3
4
5
6
7
8
9
10

 

Strength of Durable Competitive Advantage

If the company's 10 Year Earnings Per Share is rising, it means the company may have a Durable Competitive Advantage. In that case, we should analyze the company's Financial Statements to find out the strength of the company's durability. If the company's earnings is erratic; going through periods of losses or no profitability, then the company most likely does not have what we are looking for. In that case, stop here, there is no point in proceeding.

 

Value and Growth Analysis

Highlights of my Analysis:

 

 

 

Value and Growth Analysis
Price to Earnings Ratio 10 Year Growth Rate of Earnings/Share
Equity Bond Theory Municipal Bond Rate
Current Stock Price Relative Value
Projected 10 Year Stock Price Projected 10 Year Annual Return
Projected 10 Year Gain Projected 10 Year Fold Increase

 

Analysis of Income Statement

Highlights of my Analysis:

 

 

 

Durable Competitive Advantage Thresholds (Income Statement)
Year
Gross Profit Margin
Selling/General/Admin to Gross Profit
Research and Development to Gross Profit
Business Cost to Gross Profit
Depreciation/Amortization to Gross Profit
Interest Expense to Operating Income
Operating Income x Tax Rate
Income Taxes Paid
Operating Income x Tax Rate = Income Taxes Paid?
Net Profit Margin

 

Analysis of Balance Sheet

Highlights of my Analysis:

 

 

 

Economic Collapse Thresholds (Balance Sheet)
Year
(Net Income + Cash)/(ST & LT Debt Due)
(Net Income + Cash + Retained Earnings)/(ST & LT Due)
(Net Income + Cash + Retained Earnings)/(Current Liabilities)
Short Term Debt to Long Term Debt
Long Term Debt to Net Income
(Total Debt + Capital Expenditures)/Net Income
Adjusted Current Ratio

 

Business Efficiency Thresholds (Balance Sheet)
Year
(Property/Plant/Equipment)/Net Income
Return on Property/Plant/Equipment
Return on Equity
True Return on Equity
Return on Assets
Total Equity > 0?
If (Total Equity < 0), is Net Income Increasing?

 

Durable Competitive Advantage Thresholds (Balance Sheet)
Year
Total Receivables/Revenue < Competitors?
Total Inventory is Increasing?
Goodwill is Increasing? (Google what the company's acquisitions are)
Intangibles + Estimated Value of Brand Name
Long Term Investments (Google what the company's long term investments are)
Total Assets, is it a Huge Number?
Adjusted Debt to Equity
Preferred Stock: (Redeemable + Non Redeemable) = 0?
Retained Earnings is Increasing?
|Treasury Stock| is Increasing?

 

Price to Book Valuations (Balance Sheet)
Year
Price to Book Value
Price to True Book Value

 

Analysis of Cash Flow Statement

Highlights of my Analysis:

 

 

 

Durable Competitive Advantage Thresholds (Cash Flow Statement)
Year
Capital Expenditure/Net Income < 50 Percent?
Issuance (Retirement of Stock) < 0?
Issuance (Retirement of Debt) < 0?

 

My Financial Analysis of Stocks

  • Exchanged AT&T (T) for Time Warner (TWX) and Dumped Hilton Worldwide (HLT) I exchanged AT&T (T) for Time Warner (TWX). Their merger currently gives TWX a 6% premium. AT&T is offering $107/share for TWX. Time Warner is currently priced ...
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    Posted Jun 5, 2017, 12:35 PM by Intelligent Investor
  • Purchased Hilton Hotels in Anticipation of a 3 for 1 Stock Spin-Off Last December I purchased Hilton Hotels in anticipation of a 3 for 1 stock spin-off. In other words, Hilton Hotels will be splitting into 3 independent companies. The most ...
    Posted Mar 1, 2017, 6:12 PM by Intelligent Investor
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  • Sold Wabco (WBC) to Raise Cash in Case there is a Recession The signs of a recession are getting stronger so I've decided that I needed to raise cash. Out of all the stocks I own, Wabco (WBC) seems to be ...
    Posted Sep 7, 2016, 10:22 AM by Intelligent Investor
  • Sold Chicago Bridge and Iron Chicago Bridge and Iron (CBI) comprise 2.5% of my overall portfolio. I first bought this stock at around $46/share. I sold it at $34. So, I basically took ...
    Posted Aug 25, 2016, 9:50 AM by Intelligent Investor
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    Posted Mar 18, 2016, 9:54 AM by Intelligent Investor
  • Morningstar's 5-Star Stock Picks 2015 View My Financial Analysis: Morningstar 2015I analyzed Morningstar's 5-star stock pick last year and I have come to the conclusion that many of Morningstar's 5-star ...
    Posted Mar 10, 2016, 1:54 PM by Intelligent Investor
  • IBM may have Bottomed at $117/share IBM stock may have bottomed at $117/share a few weeks ago, the stock is now trading at around $135/share. IBM was just upgraded by Morgan Stanley from a ...
    Posted Mar 10, 2016, 6:39 PM by Intelligent Investor
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