How to Read a Stock Annual Report Quickly
•By Mahersaham Team
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Annual reports are documents detailing the progress and achievements of an organisation over a one-year period. For those involved in stock investing, they serve as essential reference documents for conducting fundamental analysis. Want to know what fundamental analysis is and how to use it for stock research? Read Explanation and Examples of Fundamental Analysis in Stocks.
These annual reports are packed with information and can run into hundreds of pages. It is no wonder that many people are reluctant to do their research because they get dizzy and lost looking at too many numbers and words. For your information, there are several types of businesses in Malaysia, but not all are required to have financial reports. You can read Know the 5 Types of Businesses and Companies.
There is another financial report called the quarterly report (quarter report) which is released every 3 months. However, the quarterly report is not as comprehensive as the annual report. So, which should you read? The annual report or the quarterly report?
The best approach is to read both. Use the annual report to get an overall picture and use the quarterly report to get a current snapshot of the company.
To read an annual report quickly, you need to know what information you are looking for. Pak Di, through his blog, has shared the key things you should pay attention to when conducting fundamental research using an annual report.
From the information in this statement, we can determine whether the company''s operational performance is in good shape or not — whether the business is making a profit or a loss. Among the items to pay attention to are Revenue, Gross Profit, Net Profit, and Earnings Per Share (EPS).
This statement contains information about a company''s assets and liabilities. Assets refer to property, machinery, buildings, and equipment that generate positive cash flow for the company''s revenue and hold value if resold. Meanwhile, liabilities refer to the company''s debts.
This statement displays information about changes in the company''s equity. The company may have conducted a new issuance to raise additional capital for executing new projects. All equity changes are recorded in this statement.
This is the company''s cash flow statement. A summary of all cash inflow and outflow transactions is recorded here. It is divided into 3 sections:
First: Cash flow from operating activities
Second: Cash flow from investing activities
Third: Cash flow from financing activities
These are some of the key pieces of information you need to know in order to analyse a company''s performance each year and compare it with the previous year''s performance — whether the company is improving year on year or otherwise. Each item in these financial statements has footnotes that explain the value in greater detail.
At the same time, if you want to learn how to analyse a company''s financial report, we have prepared a case study for Chin Hin Group Berhad.
If you are interested in delving deeper into annual reports, we have prepared a class on Exploring Annual Reports to help you with your research.
Credit: Pakdi.net, Empayar Saham
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An annual report is a comprehensive document published by a company detailing its progress, financial performance, and achievements over a one-year period. It is a crucial reference for stock investors conducting fundamental analysis.
There are four key statements: the Income Statement (showing profit or loss), the Balance Sheet (showing assets and liabilities), the Statement of Changes in Equity (showing equity movements), and the Cash Flow Statement (showing cash inflows and outflows).
Ideally, you should read both. Use the annual report for an overall view of the company''s performance and the quarterly report for a more current snapshot of the company''s financial health.
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