I would be interested in hearing from anyone who might have a good method to use FA
Teresa,
I think you meant if anyone might have a quick and easy, vs "good method" to use FA.
The problem here is a lack of standardized interpretation and understanding of what FA is. As an example, if I ask all the TA investors here to tell me the 200 days MA or 200 days ema of a certain stock as of close last Friday, all of you should be able to give me the EXACT answer, correct to 4 decimal places.
However, if I ask what the PE is for the same stock as of close of Friday, how many different answers do you think I will receive? Some of you will give me the trailing, some forward, some the common method of using 2 previous and 2 future quarters, some earnings may be based on GAAP, some earnings based on proforma, many will go to yahoo (or any other financial websites) and give me that random number ........ MOST WOULD HAVE NO CLUE WHAT PE REALLY MEANS!!!
I am willing to bet that no one here actually have gone and calculated that PE number themselves, using what ever financial model they deemed appropriate for that specific company in that specific sector. Furthermore, I bet you 99% of investors who claim they are FA investors would not even have their own financial model to perform the most basic of FA.
While most badmouth Wall Street analysts (including me for different reasons), most have never bothered to read a full analysts report, just the 1-4 page summary used for promo purposes. In fact, I doubted if most investors have even read that summary but rather, rely on Maria B (who never reads anything other than what is in front of her in the telepromter) to INFORM them on CNBC.
One recent analyst report that I read from a major brokerage was about a few wireless telecom stocks. The report is 176 pages long, loaded with facts, data and the methodology for their projections.
So to answer your question in my long-winded manner, I think most wall street analysts FULL reports would show you a good method of using FA (most are CFAs), it is just their conclusions and recommenations which are highly suspect.
As for a quick and dirty method of using FA, I do have a method which unfortunately, can only tell me not to buy but not what to buy easily. I think the single most important item to look at from a FA perspective is the topline number.
CSCO had been mentioned here so I will use that as an example. Chambers had been, and still is, telling the world that CSCO can grow at 30-50% top line per year. Well, at its peak, CSCO's revenue was over $20B per year and still not far from that today. If CSCO is to grow at just his low end of 30% topline, it will double every 2.5 years. So in 5 years, their revenue would be $80 billion????? Man, that is a lot of switches.
By understanding topline, you can immediately have a good picture of how many Krispy Creme outlets are needed to bring in a reasonable revenue to justify their market cap. By understanding topline, you can count how many more PCs Dell had to sell to fulfill the famous projection of 70+% growth rate by Michael Dell.
Anyway, that was just my 2 cents.
Ramsey |
