Fundamental Data

Fundamental data is currently available on S&P Comstock and DTN. Click See Also to view tables summarizing the new quote extensions available in Aspen Graphics 4.0. You can use fundamental data extensions in quote window layouts and in formula expressions.

Financial Ratios & Fundamental Analysis

Aspen Research has been in the business of writing software for the technical analyst for more than twenty years. Until now, Aspen Graphics has offered little in the way of support for the fundamental analyst.

There is a significant difference between technical and fundamental analysis. Some fundamental analysts don't look at charts, and others couldn't tell you what a stochastic is. Such things do not concern them. Instead, a fundamental analyst seeks to normalize all equities through ratios. Ratios enable a fundamental analyst to assess equities, individually or comparatively.

In the minds of fundamental analysts, ratios level the field of play such you can assess a company's ability to pay off short term debt, or compare a Microsoft to a Lending Tree. Think of the fundamental analyst as loan officer evaluating a loan application, weighing an applicant's ability to pay the mortgage his or her income and expenses. That is essentially what the fundamental analyst does with a company’s Financial Statement.

What’s in a Quarterly Report?

In the U.S., Financial Statements are required by law. A company must submit a financial statement to the SEC quarterly, and at the end of the fiscal year, the company must also submit an annual report known as the 10-K. A financial statement (quarterly and annual) must include a balance sheet, an income statement, a cash flow statement, an auditor's report, and a summary.

The balance sheet highlights the financial condition of a company at a single point in time.

The income statement is a real magnet to many fundamental analysts. The income statement includes revenues, expenses, net income before and after tax, total and per-share earnings, and many other figures. Many of the elements of Fundamental Data come from the income statement.

The cash flow statement is a fairly recent (1988) addition to the SEC requirements for financial statements. An easy way to understand a cash flow statement is to compare it to the income statement. Where an income statement includes non-cash items, like office buildings, a cash flow statement focuses on how a company’s pocket money, or available cash, relates to reported earnings. The cash flow statement is a four-section report: cash from operations, cash from investing, cash from financing, and the net increase or decrease in on-hand cash.

In the U.S., a public company must hire an independent, Certified Public Accounting firm to prepare an audit of the company’s accounting. Further, the company must submit the results of the audit as a part of the financial statement. The auditor’s report is a three-section statement. The first section indicates the responsibilities of the auditor and lists the parts of the financial statement that were audited. The second section describes how Generally Accepted Accounting Principles (GAAP) were applied in the audit, and identifies the branches (if any) of the company that were audited. The third section is the auditor’s opinion about the company based on the audit.

The summary addresses what the company does, its performance in the recent year or fiscal period, and its outlook on the future. This written summary may highlight a company’s key achievements, or mention perceived obstacles moving forward. The whole idea behind the written summary is full disclosure. For example, if a company has a lot of outstanding debt but neglects to mention its debt in the summary, investors may distrust the financial information in the statement. In extreme cases, the SEC may hold the company liable for lack of disclosure.

Quarterly reports on all publically traded companies are available for review on the SEC’s website, http://www.sec.gov/. S&P Comstock and DTN broadcast this information as it becomes available. The amount of accounting information in a quarterly report is daunting. Feeds that provide fundamental data remove a lot of tedious reading and searching necessary to identify the figures that make up Fundamental Data.

Zone Analysis

Fundamental analysis seems like a reactive exercise, and much of it is. However, fundamental data is also the basis for "zone" analysis. Zone analysis attempts to forecast support and resistance levels based on the fiduciary performance of a company.

You've probably heard or read an analyst’s claim that a particular stock should trade up or down to a particular price. It sounds like a lot of voodoo, but it's actually based on some fairly simple math. To do this math requires a history of certain fundamental data, including the stock’s current price, and certain fundamental data.

Aspen Graphics’ initial fundamental data offering will not support zone analysis because Aspen Graphics stores a single fundamental data record for each equity. To conduct zone analysis, data storage must be modified to allow multiple records (ideally twenty or more).

Limitations of Ratio Analysis

1. Large companies are often involved in many industry sectors. Hence, analyzing such diversified companies with ratios can be problematic.

2. Inflation can and has distorted many balance sheets. Inflation poses a problem in historical ratio analysis. Where inflation may be a factor, trend analysis may provide a better picture of a company's health.

3. Some companies fiddle with ratios by borrowing and paying off debt prior to submitting quarterly reports.

4. Some ratios may look good while others look poor, making it difficult to evalutate how well a company is managed.

The following table summarizes some common ratios.