Evaluating filings
Humm how do I answer that in 1 short post. I guess I say chicken & egg. To know what to look for, requires knowing what you want to find out. Most every single aspect of company business is found in these reports. And if you don't have a goal in mind, you need to evaluate the entire filing.
Guess I haven't helped so far. LOL
My point; Are you interested in it being a value or a growth company. Are you interested in weather management if doing a good or bad job. Has there been any dilution since last Q or what is causing the decline in the PE ratio.
You need to know what you want to know, in order to zero in on that. Other wise you need to read the entire thing and form an opinion on what looks strong and what looks weak. Then which means the most to you.
I don't spend alot of time on big board filings. They can be so complex company management doesn't understand whats in them. I would do a fundamentals evaluation on big board stocks and only dig into the filings if there was a single area I was interested it. Because of something seen in the fundamental analysis to cause me concern.
With OTC startups, I always read the filings because they have no fundamentals. I check share structure first, That usually involves looking at debit sections also, to see what shares,options, and warrants issued are around. Then I'd check the cash flow, to see just how bad the cash to expenses are. These are IMO the only important areas in an OTC company filing.
How much more do they spend, then take in and do they have enough cash to continue at that rate, without more VC funding. How large has the resent dilution increased, who holds large amounts of shares, can VCs get more at will and is there enough room left in the treasury to issue more for continued opperation.
You see startup companies have nothing but a plan and stock. Finding a rev stream is rare and when found, so small it's not large enough to help pay debit, let alone pay for opperations.
So after all this I'll boil it down to share structure and cash vs expense, are the 2 areas needed to be evaluated.
Evaluating share structure on an OTC company can be time consuming and needs a good amount of experience, to see whats really happening. The only way to get this, is to understand how companies do business in the first place.
They use stock to pay for services, raise cash and protect ownership.
If a company is paying marketing firms, accountants, and legal consultants with stock. Management isn't very good. They can negotiate with little guys for services, but can't negotiate with big guys to raise cash. (not worth watching)
If they have several debit loans active, this says management is good. But then you need to evaluate the terms to see how good they are. Favorible terms indicate knowledge & opperating from a position of strength. Bad terms shows weakness & desperation. (OK to watch, but if deals are not favorible, odds for 3 month Temp Job are reduced.)
If you find unaccounted for shares, restricted, series perferred, or poision pill provisions. The management cares more about personal wealth, then company growth or success. Ps; poison pill provisions state existing insider shareholders, have the right to purchase large ammounts of stock, at deep discount rates. This is use to keep aquiring companies from buying the company out from under present management. (Watch at your own risk, scam outfit)
AI
