How to analys company performance

There are several components that we can make a first step before performing company analysis. Similar analysis as we analyze a business, although there are differences with the usual business analysis. When we do analysis of a company, it helps us pay attention to the relationship between corporate performance with the behavior of its shares on the stock. As was mentioned earlier, in the short term would likely occur with the discrepancy between the value of its stock price. By knowing the prospects of a business and its true value, we can obtain a satisfactory yield.

Some basic things that used to analyze a company are as follows:

1. Nature of business. 

At this stage we learn how a business is run. What are its products, who marketnya segment, anybody competitors, how the potential for business continuity, how its management. In short, we try to find out how a company operates. Regarding the relationship between business management, there are several possibilities. Sometimes we would see a business that's so good that even mediocre management is still the company remains profitable. It could also happen that the opposite situation. In industries that are being dimmed, bright ideas and management of good management will make a strong and profitable company. The worst condition is a fading business run by poor management. Just leave the company of this type.

2. The base: Capital.

 When it appears a business idea, the next step is to seek capital. There are two main ways. The first is looking for investors who want to include capital in the form of business ownership. If the company goes public, then the sign of possession is called the stock. The bigger the corporate profits, the greater the benefits obtained an equity investor. The second way is to borrow funds. Because the form of debt, then one day be restored. Creditors will receive interest periodically with a certain amount. In the market, the debt is called a bond. On the balance sheet, capital from the stock is called equity and capital from bonds / debt liabilities is called.

Comparison of liabilities to equity will provide us information about their capital structure. Usually this ratio is called the D / E ratio (Debt to Equity Ratio). In general, the greater the D / E ratio, the greater the risks faced by the company. Why? Liabilites consists of the debts which one day must be paid including interest. Debts that are too large will be felt especially when the economy worsened. When sales plummeted, the company remains obligated to pay these debts. Although it is not impossible for a small company that went bankrupt because the debt crisis, which is more common is the bankruptcy of a company with mounting debt.

3. Profit. 

Anything as strong capital structure of a business, still it will not matter if you can not turn a profit. On a good business, we will see profits that are not only big but also continued to increase steadily. Noteworthy is the consistency of the company to increase its profits from year to year. Large profits in a year but is followed by losses in subsequent years is highly undesirable. Similarly, the consistency of increased earnings (growth). Profits are up and down will make it harder to predict how the prospect of a business in the future. For me it would be fun to have a business that profits rose consistently from year to year 

Exceptions can be granted to companies that have the potential for turnaround. The company looks very bad type seen today. But if we are observant, the company has the potential to generate huge profits in the future. Finding a company like this is harder than finding a company that actually performs excellent.

4. Cash Flow.

Cash flow (cash flow) is the lifeblood of a business. Large profits, but not accompanied with the cash inflow will be a big question mark? Is it possible proficiency level? Very likely. The amount receivable pending payment or no collectible, expansion is not measurable with a good, high operating costs is the cause.

5. The value of shares.

 If we feel sure have found a good company after analyzing point 1-4, before buying it we must ensure that the price offered is not too expensive. This process is called trap for value investing. Often the stock price becomes too expensive when the bubble in the stock. Market to be over optimistic and inflated stock prices are too high. Not a great position for us to buy. If we are patient, will market tina's time to reverse. Stock prices dropped and became very easy to find stocks that are sold at a price too cheap. An example is in 2008 when the global crisis.

The fifth step is to do our work frame analysis of a company. Much like a regular business to analyze it?