[Corporate Analysis Ability Training Course] A magical framework that enables corporate analysis that quickly and to the core

Roughly speaking

1. In order to roughly analyze corporate analysis and generate ideas, we introduce a very unique analysis book, "Corporate Analytical Skills Teached by Due Diligence Professionals."
2. A framework that analyzes companies from nine perspectives. The linkage is interesting.
3. The framework based on investment cash flow and operating cash flow is also instructive. The moment when corporate growth stops.

Rough corporate analysis generates ideas

This time I will introduce some personal hidden masterpieces. This book is very useful when conducting a rough analysis of companies.

If you can roughly do any kind of company analysis (so much as mental calculations), it will be easier to come up with ideas. It is useful for thinking about services and searching for investment stocks.

In order to do a rough analysis of your company, you need to look at financial statements, corporate materials, actual stores and business models to build them into valuable information in your mind. But you need powerful tools to do this.

Due diligence professionals teach corporate analytical skills training course (Yamaguchi Eihei/Nihon Jitsugyo Publishing) is the one that gives you all these tools. This may be a simplified analysis for professionals, but what I'm focusing on is a unique framework that delves into the heart. As I read it, I can't stop feeling like I've had enough.

9 perspectives of corporate analysis, linked framework

According to author Yamaguchi Akehei, corporate analysis is carried out from the following nine perspectives: And each viewpoint works together.

First, there are social trends. Corona is a typical trend these days, but it also includes the economy and trends. Social trends affect the market structure of each industry, and also affect the macroeconomics in the form of foreign exchange, crude oil, and interest rates.

The market structure will eventually attract players who find it attractive to the market, creating a competitive structure, and a business structure (business model) is formed to advance the competitive structure. Some players push low prices, while others attack on high-end directions.

As stated in P/L, the revenue structure refers to the income statement, but the elements introduced so far work in the image shown below. In the macroeconomics, foreign exchange rates affect sales, crude oil operating profit, and interest rates affect current profits (image is manufacturing). Market structure affects sales, while business structure affects operating profit.

Next is the effect on B/S (balance sheet). In B/S, net income is recorded as net assets, and the market value of assets held by shareholders of net assets is the stock price. Stock prices are also influenced by capital policy, that is, how the company uses its capital, as well as communications between its consumers and shareholders.

The above nine perspectives are organically connected through financial statements, so this framework is more useful than it looks. I use this framework in my head and use it to analyze stocks in my everyday life and stock investments.

Determine the current stage of a company through investment cash flow and operating cash flow

There is one more diagram I would like to introduce. This is a framework that determines the current state of a company and its growth potential based on a statement of cash flow.

Operating cash flow shows the increase or decrease in cash in your main business, while investment cash flow shows the increase or decrease in cash in all of your main business and other investment activities, but in general, when a company is growing, operating cash flow is positive and investment cash flow is negative.

However, operating cash flows will soon remain high, and there will be no room for investment, and investment cash flows will also be positive. This is a period of stagnation. Furthermore, if operating cash flow goes down, it will be forced to sell previous assets. This is a period of slump. Eventually, the assets to sell will no longer be available, and they will head into a bankruptcy period.

What's amazing about this framework is that it clearly shows the room for growth for companies.

It was in 2008, but it clearly shows that Microsoft was stagnant and Google was in the process of growing, and that Daiei was in the midst of its difficulties.

When there is no room for investment, companies have positive investment cash flow, indicating that they have not found a new move. If you live with this in mind, you will be able to imagine how the food and beverage and aviation industries are being forced to raise strong funds and sell assets in the daily news. However, if a company that is actively investing in the same industry appears, there is a high chance that it will become the winner of the next era. Hulic in the real estate industry is making aggressive investments in the city center, and this will allow us to make decisions that we can raise expectations. I hope you will be exposed to this book's intensive analytical framework and try your own edgy analysis. It could also be used as an example of creating an excellent framework yourself.