Financial Statement Analysis: Advanced Visualization

The following video explains some of the advanced visualization capabilities of Valuation Tutor. Below the video is a written example.

Here is the written example. In an earlier post, I described the basic charts produced by Valuation Tutor. For any model (e.g. common size analysis or DuPont Ratios or price ratios) covered by Valuation Tutor, the base visuals let you compare a field calculated by the model (e.g. sales/assets, ROE, P/E ratio) to competitors, sectors, industries, in fact to any subset of companies you want. These visuals look at a single field across multiple companies. The advanced visuals show you multiple fields across multiple companies, though here, you want to keep the number of companies small because the goal is to focus on detailed differences across a few companies. Let me show you how to use these to discover how two companies differ in converting a top line item (like Sales) into a bottom line item (like Net Income). I will compare two companies selected from our dataset. The first is Green and the second is Red. Consider this screenshot taken from Valuation Tutor’s Advanced Visualization window, where the model is Common Size Analysis: Unscaled Values, which means that we are looking at the raw financial statement information:

The first chart shows that Green has more than three times the sales revenue of Red.  The Gross Margins are about the same (Red is 87% of Green), so this already tells you that Green must have a proportionately higher higher cost of goods sold.    You can see that Red does a much better job of converting the top line (Sales) into the bottom line (Net Income): Green has three times the sales but about 2/3rd the net income.   I would have my students go find out what is causing the difference; this has the side benefit of having them become familiar with the statements.  Incidentally, the mouse-over tells you the values being plotted and also the numerical proportions.

Also, just as a comparison, you can see the same information in a column chart.  I find that the relative differences jump out more easily in the pie charts shown above.  Here is the column chart of the same data:

Valuation Tutor lets you choose the type of chart, so if you find the column chart more intuitive, you can use that.