As a follow-up post (see stock selection guide), I write this one to filter all the information that Yahoo finance provides when looking up for a company quote.
- Summary: is a good place to make sense of the technical details of the shares. Ranges, volume and beta are useful indicators.
- Historical prices, if can be plotted into a graph will be very useful to study the historical trend of the shares and compare it with an index.
- Interactive chart of Yahoo finance updates in real time and it offers logarithmic scale (smooths spikes). As a recommendation I would calculate high and low prices in yearly intervals to see if the possibility of profit is empirically real (technical analysis).
- Headlines and news should be quickly read (no need to read the details) and mark them as positive or negative impact.
- The information in Key Statistics tab should be used to compare with other companies, therefore used in conjunction with Competitors and industry tab. The Beta provided can be used to calculate CAPM and have a degree of understanding of how it moves with indexes. If Beta of a company is over 2 it means that it moves a lot more if the index moves 1% (mathematically a Beta of 2 does not mean that the stock will duplicate its value if the index goes up) and it moves in synch with the index the closer Beta gets to 1.
- Income statement, balance sheet and cash flow statements should be used to calculate increases in earnings (compare one year with another) but should not be taken for granted. For example, some costs may extend several terms so that profits at the end are waned not because of reduced income but because of expenses from previous terms. Therefore, book values are not consequently related to market prices, a profitable company may not have a good book value and vice versa.