Collecting Basic Data on a Stock

Step 1: Where Do I Find the Data I Need to Analyze a Stock?

The Valuation Worksheet provides a systematic approach to gathering information needed for the valuations. Clearly, the information sources play a critical role in the analysis. Here, we take a closer look at sources of information and some of the problems and differences you may encounter when using them.

Per Share Data

Most of the information on the Valuation Worksheet can be derived from the per share financial information detailed at the top. This consists of, for each of the last five years: high and low share prices, earnings per share, dividends per share and book value per share.

The primary source for the per share information is the firm's annual financial reports. Corporate annual reports will include both summary and detailed financial statements, although even more detailed financial statements are available in a separate report, the 10K. Both of these reports can be requested from the company, or obtained at the SEC's website.

The detailed financial reports include the standard balance sheets for the last two years listing company assets, liabilities and shareholder equity; income statements for the last three years listing items such as revenue, expenses, dividend payments and earnings; statements of shareholders' equity for the last three years, which tracks the flow of funds into and out of shareholders' equity including retained equity and proceeds from new stock issues or stock option plans; and cash flow statements for the last three years, which examine increases or decreases in cash based on company operations, investing activities and financial activities. [The Investor Classroom called "Digging for Gold: What the Financial Statements Reveal About a Firm" explains the individual items on these statements and how to use them.]

Also included in the detailed reports—and highly important—are the notes that accompany the statements. The notes will address factors such as whether there were any changes in accounting policies that may impact the statements; a breakdown of inventory; depreciation schedules for property, plant and equipment; terms of capital leases; detailed tax expense reports; litigations; material business changes such as acquisitions, investments and major commitments with other companies; and even a detailed breakdown of long-term debt.

The annual report will also include a summary table that could prove useful in filling out the valuation worksheet. These tables often cover a five- or 10-year span and may include basic data such as earnings per share, dividends per share and book value per share. Some annual reports will also list historical high and low stock prices. However, there is no consistent format for these tables, and the amount of information provided varies from firm to firm.

Investors should always closely examine corporate financial reports. However, because of accounting differences and other consistency problems, it can be difficult to compare the data from one company's financial report to that of another.

A better bet for the beginner is to use one of the various information sources that do much of the legwork and adjustments for you. You can then refer to the corporate financial reports to double-check these sources and answer questions that might arise from the data they present.

The information sources presented in Table 1 provide extensive information on the companies covered; while there are other sources of piecemeal information, the ones listed should present you with enough basic information to complete the simplified Valuation Worksheet.

Continue to Step 2 »