Friday, September 14, 2018

Three-Dimensional Stock Analysis

1D, 2D, 3D, more...

Most analysis is done on a single stock and rarely involves contrasting it to similar companies.
The value of peer comparison is well understood, but few people do it because the time investment makes it untenable.  If, for example, it takes you one hour to analyze a stock, comparing it to just four peers means a four-fold increase in time.
This time hurdle is what forces most analyst/investors to limit themselves to two-dimensional analysis – vertical (ratios created by going down financial statement/market data at a single point in time) and horizontal (ratios created over more than one period).
The third dimension is peer comparison.
When you take a horizontal or vertical ratio or valuation calculation and you compare it to a group of peers, you are adding a third dimension of analysis.
Let’s say you are using a p/e ratio.You know what it is currently, you know how it ranged historically.  You’ve got two-dimensional insight on that value. But when you compare it against the ratios of peer companies, you have more context, more insight.
INVRS was designed for peer comparison with our portfolio-based analysis.
First, it’s a snap to find peers – you can use our research tab or stock screener to quickly assemble a group of related companies (for more information watch our video on portfolios).
Next, with a couple of clicks you can add candidate stocks to a portfolio.
Finally, run the portfolio against all the analysis criteria you want.  It takes no more time than doing the analysis on one stock.
Adding a third dimension to your analysis can make a difference on so many levels – it can give you inspiration for new ideas, it can help keep you more objective and give you insight that other analysts just don’t have.
I hope to be reading one of your three-dimensional analyses soon!

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