How to Do a Company Analysis? (Free Templates)

A company analysis is the process in which an investor tries to evaluate a company’s profitability, profile, products, and services. A company analysis, sometimes known as fundamental analysis.

During the analysis, there is some basic information about the company that must be incorporated. These include the company’s mission, vision, goals, and values.

Through the analysis, the investors can determine whether the company is making a profit or loss. Therefore, they can strategize for future plans to make everything work as expected. If the company is offering manufacturing services, for example, then the analysis will focus on the products manufactured as well as their quality. If the company provides services, then the analysis will be based on the services put forward.

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Why is Company Analysis Important

If you want to a successful investment with any business or company, then conducting a company analysis should be a thing of your concern. More often the analysis will help you evaluate the company’s performance from time to time. Additionally, the process helps you understand some risks that may come your way so that you can mitigate them in advance. Also, it helps you identify new business opportunities that can work well with the company of interest. Last but not least, a company analysis can help you select good stock for the company’s portfolio.

Steps to do Company Analysis

Conducting a company analysis can sound overly daunting and formal. However, this shouldn’t get you dissuaded. While it is important to get everything covered, the whole process isn’t always that complex.

Here is a guide that will help you through:

Identify the company’s economic characteristics

Identifying the economic characteristics is an important step for your company analysis. By identifying the financial characteristics, the investor can determine the stability in the financial flows, including the return on equity (ROE) and their relative value. This information is very necessary as they help point forward the new direction of a company’s investment.

For example, you can use the Stockedge app or go to the company’s website and click on the “About” section.

Know their services

After understanding the financial characteristics of the company, as an investor, you need to understand the products and services rendered. Other factors to put into consideration include the uniqueness of the product/services, the market demand and supply dynamics, and, more importantly, brand awareness.

For example, you can go to the company’s website and visit the services section.

Estimate the risks

It is obvious that every business, whether big or small, comes with its own share of risks and challenges. As an investor, you need to understand the risks associated with the concerned company or business. But you shouldn’t just stop at identifying the risks. Dig deeper to know to what extent the company will suffer the risks in case of an eventuality.

For example, if the company deals with petroleum products, some of the unavoidable risks include price fluctuations. Ask yourself, to what extent will the price fluctuations affect the business? And what measures are there to overcome such?

Interpret company’s financial statements

After knowing the company’s financial history, products/services offered, and risks, it’s now time to get the actual quantitative picture. Many experts will tell that interpreting the company’s finances is the most important for investors. When interpreting the income statements, you need to pay attention to the margins, topline, and bottom-line. Other than the income statements, you can also take a look at the cash flow statements and profit and loss statements, among other financial books.

For example, you can visit the company’s website and go to the section written revenues/income.

Compare the company with competitors statistically

While scrutinizing through the financial books, as an investor it’s important to have a relative comparison of both the present and past books. This will help you predict the future. Also, you can compare the financial statements with other worthy competitors or other market players in the industry.

For example, you can compare the financial revenues from the website of a company of interest vis-a-vie a close competitor.

Methods of Company Analysis

Generally, there are two primary methods an investor can use to perform a company analysis. These include the top-down method and bottom-up approach. These two methods are very effective and can give reliable information about the company being analyzed.

They are described below:

Top-down approach

The top-down method is associated with the analysis of macroeconomic factors such as inflation, economic growth, and monetary policy, to mention a few. In other words, the investor concentrates first on events prevailing in the market before looking into the individual stock.

Bottom-up approach

In the bottom-up approach, the investor will start by looking into the company’s stock then creating a portfolio based on the existing observations. Unlike the top-down approach, where the investor looks at macroeconomic factors, the bottom-up approach majorly focuses on microeconomic factors. For example, a bottom-up approach could investigate what a company could do to maximize its production and capacity for it to lower prices and compete better in the market. Microeconomic factors could include labor, cost of production, distribution channels, competition level, among others.

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Factors Affecting Company Analysis

The process of analyzing a company can sometimes be influenced by certain factors. These factors can be categorized either as qualitative or quantitative.

As discussed below:

Qualitative factors

While they are difficult to measure, qualitative factors often play a significant role in any organization/company. Because they can’t have precise measurements, they are often subjective and tend to have either a positive or negative impact. Usually, these factors consider a company’s business model, competitive advantage, corporate governance, and management.

Business model

Under the business model, the investor will want to know what the company does. Also, they may want to know what prices the company sells its products to the consumers.

Competitive advantage

Here, much consideration will be laid on the uniqueness of the company’s products or services. The competitive advantage for any company is often determined by the uniqueness of its products or services. If the company is offering unique or different services to the market, it will definitely have some competitive advantage over its competitors.

Management and corporate governance

Management and corporate governance are often described by the system of rules, policies, and practices set by the company’s board of directors to control various operations. Here, an investor will mostly look at how experienced the management staffs are while delivering their duties. For management to be considered good and effective, they should be able to abide by all the set rules and regulations.

Quantitative factors

Quantitative factors are those that can be measured numerically. These factors majorly deal with the industry’s growth and development in comparison with its peers. In other words, an investor will not only look at a company’s growth but will make a comparison with its competitors in the same field while taking every factor constant. That’s said if a company has a good record of growth but with poor balance sheets or any other financial documents, then it is considered risky for investment.

Tools for a Company Analysis

While there are several tools you can use to do a company analysis, one of the most reliable is StockEdgeApp. Through its comprehensive data collection system, the tool will help you achieve an efficient analysis with ease. Alternatively, you can check out other broker reports on the company from sites such as researchbytes.com.

Free Analysis Templates

If you are planning to create a comprehensive company analysis, here is a great chance for you to achieve your ambition. You can use our ready-to-use templates to get all-inclusive information about the company of your choice. Besides, our templates are easily customizable hence can suit your preference at all times, simply download the templates here for free and get going.

Company Analysis Template 01

Company Analysis Template 02

Company Analysis Template 03

Company Analysis Template 04

Company Analysis Template 05

Company Analysis Template 06

Company Analysis Template 07

Company Analysis Template 08

    Frequently Asked Questions

    What is the difference between a company and business analysis?

    While people tend to confuse the two, they often have a different meaning. A company analysis describes a company, its management, operation, and how it engages with all segments, including suppliers and the market. On the other hand, a business analysis only narrows down to the businesses that the company trades with as it performs its duties.

    What is the objective of company analysis?

    The main objective of company analysis is to evaluate securities, company profile, profitability, and products and services provided for investment purposes.

    Key Takeaways

    • Company analysis helps in evaluating the profitability, performance, products, and services.
    • Performing a company analysis helps an investor make a rational and informed decision on his/her interest before investing.
    • It’s important that an investor understand the management of any company before signing their engagement. Usually, the management can either make or break a company’s profitability.
    • Financial documents such as cash flow statements help in giving a clear picture of a company’s financial activities.
    • For you to understand every detail about a company, you need to consider looking at both the qualitative and quantitative factors.

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