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Thorough investment analysis helps to see a company’s expenditures, its management’s efficiency in creating profits, and how positive the company's future prognosis is.
The purpose of this analysis is to compile multiple datasets containing quarterly financial statements from publicly traded companies over 1-year period (2020), and create a model for determining the estimated value of a company based on its financial position using publicly available data. The main goal of this analysis is to identify companies that are undervalued by the market, and whose share price is projected to increase in the future to make profitable investment decisions.
The stock market has reached record highs and is projected to continue increasing due to breakthrough innovations in Artificial Intelligence, 5G networks, and automation in manufacturing. There are thousands of companies trading on the stock exchange. Data allows an investor to find those companies that are in excellent financial health and exceed market expectations. Data-driven financial investment decisions may increase an investor’s potential earnings.
I chose this topic, because I have always been interested in the stock market. However, I never could find the time to explore it. Thanks to Nashville Software School I was able to learn so much about the stock market investing. The idea of investing and making a profit is very enticing. However, before working on the project, I knew very little about the stock market, and I had to start from the very beginning. I am hoping that answering the data questions will enable me to use the findings to make good investment choices.
What are the top 3 financially strongest companies based on the annual Financial Statements reports (working capital, cash per share, current ratio, earnings per share)?
Does the data show a trend?
Is it possible to forecast financial trends?
For calendar quarter there are 8 tables for review. All of them carry a certain value. However, I have focused specifically on the data sets submission and number.
After having reading up on the stock market, I chose to pay special attention to one of the most common forms, 10-K, Annual report for my analysis.
I started with exploration of 10-Ks: their number in each Quarter, what fiscal years, dates are presented in the data sets, whether or not each company submits only one annual report or more, the dates and the number of reports presented in FY2020 filings.
Through a comparative analysis I selected Microsoft, Nike and KLA as the top 3 stocks based on the specific performance indicators. Had I invested in these 3 companies after the June 30, 2020 10-K release, I would have made a profit of 10%, 32% and 26% respectively.
I also conducted a five-year stock price analysis of the top 3 performers and created average share price with forecasting charts for them. We can see quite a steady price growth.
The calculations are based on the Q3 2020 data only.
There’s a lot more to learn and more data questions to answer.
In the 2020 Q1 data set there are no filings for FY2020. Since 2020 Q4 has recently closed, the data is not yet available. We are left with 2 quarters of financial data to work with as of right now. In order to get a full FY2020 financial picture, we will have to wait for 2021 Q1 to close and the data is released.
The data sets contain historical filings.
The majority of companies submit only one 10-K report for a respective FY.
Microsoft, Nike, and KLA are the top undervalued stocks based on the conducted comparative analysis.
Data does show financial trends, and it is possible to forecast them. However, financial projections are a set of assumptions based on historical company and industry results.
The statements are open to interpretation, and as a result, investors often draw vastly different conclusions about a company's financial performance.
Never blindly accept what stock analysts have to say and always do your own research.
Incorporating more tables into the analysis will give so much more insight.