How to Analyze Company Data with Yahoo Finance Like A Stockmarket Oracle

Maximizing your financial analysis time with Yahoo Finance

I use Yahoo Finance a lot in my company research.

Initially, I was skeptical of the results it would bring. As someone who reads a lot of annual reports, I wasn’t sure if Yahoo Finance could provide accurate data.

I’ve used it previously and found discrepancies but I decided to give it another go.

And, you know what?

They’ve improved their game and the data they provide now is definitely accurate enough for value investors.

In this article, I’ll quickly teach you how to use Yahoo Finance to assess a company’s financial situation and decide whether or not the company is a good or bad investment.

✅️⏺️⏺️ Step 1: Which companies should you look at?

There’s a myriad of companies you could look at, so knowing where to start could be difficult.

Really, all I do is just go onto forums, read the news, and look at company lists just to find inspiration.

I’ve got about 4 sources I can share with you.

Reddit

You can get a lot of ideas from Reddit. People are always posting and it’s a good place to get general ideas. The research quality can vary and you get a lot of opinions.

Value Investors Club

Value investor’s club is a good place to get in-depth research; however, sometimes it’s a bit too in-depth if you ask me. The research is good but I’m always weary of too much research and interpetation.

The Wall Street Journal

Above is an example of what the Wall Street Journal shows as part of its daily market newsletter. It’s not much but it makes for a good update. Just make sure you sign up for the ‘Market’ newsletter.

Slickcharts

I make sure that I even look for under-represented companies because they’re the ones that usually make it big after some time. I usually scroll down this list and look at companies that don’t get too much media coverage. I think they’re the hidden gems.

There are probably other sources like Twitter feeds, blogs, etc. I use those sources once in a while but I think those 4 sources above are more than enough.

✅️✅️⏺️ Step 2: How to Navigate to Company Finances on Yahoo Finance

The good thing about Yahoo Finance is that you can just go onto the page and start researching even without having to log in.

Here are some simple directions below:

1. Go to the Yahoo Finance Website.+
2. Search for your desired company in the search bar.

3. Navigate to the Financials section

Yep, it’s as simple as that.

I’ve also included Tesla’s revenues from its 10k just to show how accurate Yahoo Finance is compared to the actual annual report data.

✅️✅️✅️ Step 3: Analyze the Financial Statements

There’s a multitude of ways you could analyze a company’s finances but some of my favorites include the following:

1. Consistent Operating Income
2. Operating Profit Margin
3. Return on Invested Capital

Consistent Operating Income

To do this all you need do is go to the operating income or loss line and view if the profit has been rising or falling over the years.

I’ve provided an example below via the Yahoo Finance App.

Really, what you’re looking for are companies whose operating income is growing gradually year on year. A general rule of thumb is 15% profit growth year on year. But, beware of very high growth since such growth usually isn’t sustainable.

Operating Profit Margin

This is simply earnings before tax divided by total revenue. Simply, all this number means that for every dollar of revenue earned the company gets X dollars back as pre-tax profits.

I’ve provided some values below for Tesla.

• 2019: -0.3%
• 2020: 4%
• 2021: 12%

Are these profit margins good? For 2021, they are quite good. If the average business has profit margins of 10%, then 12% is slightly above average. Furthermore, you can see improvements over the years.

Generally, you want the operating profit margin to be as high as possible.

Return on Invested Capital

This ratio can be calculated as earnings before tax divided by debt plus equity.

Here are some Return on Invested capital values for Tesla.

• 2019: -4%
• 2020: 4%
• 2021: 18%

What this number tells us is that Tesla is making a good return for the amount of cash, assets, and borrowed money it has in the business. Ideally, you want this number as large as possible as well.

Here’s an analogy if you’re not too familiar with the concept of capital. Let’s say that you own an investment home outright for 250k, and you rent it out for 25k a year. That’s a return on invested capital of 10%. (25/250*100)

Then, let’s say you borrow 50k from the bank to upgrade your rental home. So, what it’s worth to you is now 300k, but you can now rent it for 40k a year. That’s a return on invested capital of 13.33%. (40/(250+50))

In a way, you’ve increased the value of your property by 3.33% just by investing a bit of borrowed money into the place.

Conclusion and Next Steps: Will You Be the Next Oracle of Your Home Town?

Perhaps, I’ll be exaggerating if I say you’ll be the next Oracle of Omaha but you’ll definitely out-compete the competition in terms of recognizing companies with dud finances.

By using Yahoo Finance, you’ll be about to spot financially healthy or unhealthy companies in record time.

Here’s a recap of some of the main points:

• Find research ideas from websites such as general forums, niche forums, business newspapers, or lists.
• Learn to navigate the Yahoo Finance website, so you can view information quickly.
• Focus on these 3 key financial metrics: operating income, operating profit margin, and return on invested capital.

Finally, if you’re a Pythonista, instead of using the Yahoo Finance website or app, you could just use its API instead. See how!

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