History Scan – An introduction.

‘Past is a fact. Future is just an opinion, estimate or a hopeful thought’.

The financial history of a company, however great, is not a guarantee of any sort that it will continue to perform so in the future. However, History is the only factual material we have and studying the past data provides insights into lot of factors – qualitative and quantitative – that may help to form an opinion about the company.

SOURCES TO COLLECT HISTORY.

The data to be collected includes dividend payment history, stock splits, bonus, historical highs and lows, volume of shares traded history about management and so on…You have to collect at least 5-10 years historical data of a particular company.

The first source would be the documents and updates that companies themselves put out. Take the annual report. These are usually treasure troves of information on financials, material developments through the year, management strategies and outlook.

The Internet is one powerful tool where you can get all the past information about a company. The BSE and NSE websites give broad market information such historic stock prices, volumes, shareholding patterns, financials and corporate actions, annual reports , important ratios and much more.

Moneycontrol, Yahoo finance, Google finance and Reuters are other websites from where you can dig out a wealth of information about a company.  Financial informations for the past years like balance sheet, profit and Loss, cash flow, all ratios including book value and P/E , experts comments, audit report, competitors , news about the company, charts , trends…everything is available in separate tabs.

There are other websites such as myiris.com where research reports put out by brokerage houses are available. All main ratios and analysis are also available.

There are a few indicators that signal poor liquidity in a stock. For instance, if you find ‘$’ tag in a BSE (Bombay Stock Exchange) stock, be careful. These are stocks from the Indonext segment – which denotes that it falls under the small and medium enterprises group. Stocks from this segment do not see good market demand.

Based on certain qualitative and quantitative parameters, BSE has categorized stocks into different groups. ‘A’ group stocks, the most liquid in the lot, are the ones that have reported trading in 98 per cent of trading days in the preceding three months and have been checked by the exchange for adherence to compliance norms. ‘T’ group stocks come in trade-to-trade category where only delivery trades are allowed due to surveillance reasons. ‘Z’ category companies are ones that have not complied with listing requirements of the exchange and have pending investor complaints.

CONCLUSION.

If you are valuing a company, a 5-10 year scan of its history is a must. The assumption is that , if there is a great business that’s driven by a team of dedicated people – and if they have shown that they are capable of generating more and more revenues in the past -they will continue to do so in the near future also. Without this assumption, you cannot enter into any stock.

We have mentioned some websites that contains this information. But these websites would contain a large collection of data, all of which may not be required for analysis. Our next lesson – The Eight point check list- deals with what’s required and what’s not.

You may like these posts:

  1. Introduction to financial ratios
  2. Understanding Annual reports.
  3. How to read an Annual report.

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