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Diving into the Financials

Published on 15/10/2020

At Upside, we are always going on about the importance of research when investing in single stocks... or analysing anything really.

And research isn’t a one time deal either; you need to do it again and again and again. Keep revisiting, keep weighing up the facts and re-evaluating your investment ideas.

How does it look against current conditions, are there competitors creeping into the space, how is the management of the company doing, what about the financials? The P&L and cash flow statements?

It can feel overwhelming, but the good news is you don’t need a degree to do it. Investing is simple.

Here at Upside, we can help you navigate all these things, guiding you through the minefield that can be investing, using jargon free language. But first, let us help you understand what we mean by “financials”.

Financials are important as they are like a health check or an MOT. They are a standardised (well...mostly!) set of terms and measures that allow us to compare one company to another. And like an MOT or health check, watching them evolve over time allows us to check on progress, improvements, and management’s skill.

Once we understand these basic ideas, we can then try to use them to navigate:

  • How much money does the company have?
    Like our own bank accounts, if the cash is too low things can get stressful, too high and maybe we should be investing (or paying dividends).

  • How much operating cash flow and free cash flow does the company generate?
    These two numbers in combination allow us to work out how steady the company may be.

  • How much debt does the company have? Think both long and short term.
    Debt can be a very useful tool, accelerating performance, but too much can be debilitating.

  • What does the year on year (YOY) revenue look like? What about the last few years?
    Are things improving or deteriorating, why?

  • What is the company’s debt to equity ratio?
    In itself, this might mean little, but it helps to compare with other companies in the same industry.

  • What are the margins - gross, operating, and net?
    In the end, it is always about profit, and how long we (as investors) are prepared to wait for it.

Phew… Sounds like a lot, right? Well actually no, any listed company is required to publish information, but finding it and comparing it can be hard. So, here at Upside, we go one step further. We help provide our users with live pricing and consolidated company data, adding further fuel to your research fire. And in no time, those investment ideas will be flowing, and your conviction levels will be skyrocketing.

All you need is the confidence to start, and when Upside has your back, you’ve got nothing to worry about. We’ll be there every step of the way to help out. We know there’s a science to being right.

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