Qualitatively Analyzing the Company
Instead of looking at the financial statements right away, let’s take a look at ways to measure the qualitative value of a company.
The first thing to ask when qualitatively analyzing is “what is the company’s business model” or “how does the company make money.” Perhaps the easiest way to get a direct, forward answer is by checking out the company’s website or reading the first part of its 10-K filing. Some business models are easy to understand, such as selling cookies, but others can be much more complex.
If nothing else, an investor should at least understand the business model of the company he/she invests in. Warren Buffett, regarded as one of the wisest investors of our day, rarely invests in companies within the technology sector because most of the time he doesn’t understand them. The technology sector isn’t bad; Buffett simply doesn’t feel comfortable investing in this particular industry. If you don’t understand a company’s business model, you won’t know what will drive future growth.
Competitive advantage is another key thing to consider since a company’s long-term success is mainly driven by its ability to maintain a competitive advantage. Microsoft’s domination of the personal computer operating system is an excellent example of a company keeping competitors at bay and continuing its own growth and profits. Only by achieving a competitive advantage can a company’s shareholders be well rewarded for decades.
Management
It has been said that management is the most important aspect for investing in a company. So how does an average investor go about evaluating the management of a company? After all, unless you’re a fund manager interested in investing millions of dollars, that’s little chance you can even schedule a face-to-face meeting with the upper management of a company.
Nearly every public company has a corporate information section on its website. Within this section there is usually a quick biography on each executive detailing their employment history, educational background and any applicable achievements. But this is only the beginning of your research. You’re not only looking for competency, but also for dirt and no company is going to put negative information on its corporate website.
Here are a few ways anyone can get a feel for a company’s management team:
1. Conference Calls
The Chief Executive Officer (CEO) and Chief Financial Officer (CFO) usually host shareholder conference calls, although other executives will join them as well. Most of these conference calls begin with an overview of performance and plans for the future. What is really interesting is the question-and-answer portion of the call that occurs at the end. This is when analysts call in and ask direct questions. The answers received can be quite revealing about the company. It’s also to pay attention to how they handle the questions. Do they avoid questions or do they provide forthright answers?
2. Ownership and Insider Sales
Just about any large company will compensate executives with a combination of cash, restricted stock and options. While there are problems with stock options (See Putting Management Under the Microscope), it is a positive sign that members of management are also shareholders. The ideal situation is when the founder of the company is still in charge. Examples include Bill Gates (in the ’80s and ’90s), Michael Dell and Warren Buffett. When you know that a majority of management’s wealth is in the stock, you can have confidence that they will do the right thing. As well, it’s worth checking out if management has been selling its stock. This has to be filed with the Securities and Exchange Commission (SEC), so it’s publicly available information. Talk is cheap – think twice if you see management unloading all of its shares while saying something else in the media.
3. Past Performance
Another good way to get a feel for the management is checking to see how executives have done at other companies in the past. Although the biographies on corporate websites may sound exciting, the whole truth can be surprising sometimes. To do a background check, check the companies they worked at in the past and do a search on those companies and their performance. Also take note of the reasons previous positions were given up, especially if a previous position was much higher than their current status.
TraderPower Featured Companies
- Annovis Bio Inc. (NYSE: ANVS)
- Astrotech Corp. (NASDAQ: ASTC)
- Cepton Inc. (NASDAQ: CPTN)
- Clene Inc. (NASDAQ: CLNN)
- CNS Pharmaceuticals Inc. (NASDAQ: CNSP)
- Eloro Resources Ltd. (TSX.V: ELO) (OTCQX: ELRRF)
- Fintech Ecosystem Development Corp. (NASDAQ: FEXD)
- Freight Technologies Inc. (NASDAQ: FRGT)
- InMed Pharmaceuticals Inc. (NASDAQ: INM)
- Lexaria Bioscience Corp. (NASDAQ: LEXX)
- McEwen Mining Inc. (NYSE: MUX) (TSX: MUX)
- Mullen Automotive Inc. (NASDAQ: MULN)
- Scinai Immunotherapeutics Ltd. (NASDAQ: SCNI)
Top Small Cap Market News
- $ANVS Annovis Bio Inc. (NYSE: ANVS) CEO Discusses Findings of Buntanetap Phase 2/3 Alzheimer’s Study on the Bell2Bell Podcast
- $SCNI InvestorNewsBreaks – Scinai Immunotherapeutics Ltd. (NASDAQ: SCNI) Enters Into $2M Investment Commitment Agreement with Its Largest Existing Shareholder
- $INM InvestorNewsBreaks – InMed Pharmaceuticals Inc. (NASDAQ: INM) Announces Exciting INM-901 Data Providing ‘Attractive Therapeutic Approach’ in Alzheimer’s Treatment
- $SFWJ Hemp Industry Says Missouri Governor ‘Overreached’ When Banning Hemp Intoxicants
- $RFHRF InvestorNewsBreaks – Renforth Resources Inc. (CSE: RFR) (OTCQB: RFHRF) (FSE: 9RR) Shares Update on Completed, Upcoming Exploration Activities
- $MUX InvestorNewsBreaks – McEwen Mining Inc. (NYSE: MUX) (TSX: MUX) Closes on Acquisition of Timberline Resources
- $ECGI InvestorNewsBreaks – ECGI Holdings Inc. (ECGI) Says Success of Allon Equestrian Apparel Line at AETA Is ‘Pivotal Moment’
Recent Posts
- $ECGI InvestorNewsBreaks – ECGI Holdings Inc. (ECGI) Says Success of Allon Equestrian Apparel Line at AETA Is ‘Pivotal Moment’
- $MUX InvestorNewsBreaks – McEwen Mining Inc. (NYSE: MUX) (TSX: MUX) Closes on Acquisition of Timberline Resources
- $RFHRF InvestorNewsBreaks – Renforth Resources Inc. (CSE: RFR) (OTCQB: RFHRF) (FSE: 9RR) Shares Update on Completed, Upcoming Exploration Activities
- $SFWJ Hemp Industry Says Missouri Governor ‘Overreached’ When Banning Hemp Intoxicants
- $INM InvestorNewsBreaks – InMed Pharmaceuticals Inc. (NASDAQ: INM) Announces Exciting INM-901 Data Providing ‘Attractive Therapeutic Approach’ in Alzheimer’s Treatment
- $SCNI InvestorNewsBreaks – Scinai Immunotherapeutics Ltd. (NASDAQ: SCNI) Enters Into $2M Investment Commitment Agreement with Its Largest Existing Shareholder
- $ANVS Annovis Bio Inc. (NYSE: ANVS) CEO Discusses Findings of Buntanetap Phase 2/3 Alzheimer’s Study on the Bell2Bell Podcast
- $FLGC CannabisNewsBreaks – Flora Growth Corp. (NASDAQ: FLGC) Leveraging Colombia, US Facilities to Distinguish Itself Within Highly Competitive Space
Recent Comments
Archives
- August 2024
- January 2023
- June 2022
- December 2021
- September 2021
- August 2021
- July 2021
- June 2021
- May 2021
- April 2021
- March 2021
- February 2021
- January 2021
- December 2020
- November 2020
- October 2020
- September 2020
- August 2020
- July 2020
- June 2020
- May 2020
- April 2020
- March 2020
- February 2020
- January 2020
- December 2019
- November 2019
- October 2019
- September 2019
- August 2019
- July 2019
- June 2019
- May 2019
- April 2019
- March 2019
- February 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- January 2018
- December 2017
- November 2017
- October 2017
- September 2017
- August 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016
- February 2016
- January 2016
- December 2015
- November 2015
- October 2015
- September 2015
- August 2015
- July 2015
- June 2015
- May 2015
- April 2015
- March 2015
- February 2015
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009