Forum Archive Index - November 2001

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi james,
 
>
> If you were going to research up on a company what would you look
> for in the annual reports that would tell you they are making a
> definite profit, that would effect the shares, I have some formulas
> at home but I haven't got round to using them being young and lazy
> so I was just wondering what other people are using to work this
> out.
> 
>
You mean you want to invest in a copmpany that actually makes a real 
profit?   What sort of an investor are you! ;-)

The simple answer is that you simply need look at the net profit 
figure as published in the annual report.  If it is positive, then 
there is your answer.

But there are little tricks to watch out for.   Personally I would 
look at net profit before abnormal items.  An abnormal item, be it a 
profit or a loss, is not something that is going to be repeated the 
next year and will not be an indicator of profitability in future 
years.  

I would also look very carefully if a company is using vendor finance 
to generate sales.  After all, business profitability eventually 
rests with actually getting paid.  Giving product away in the hope 
that it will be paid for in the future is not quite the same thing as 
having money in the bank.

As for the question as to how the profit figures will affect the 
shareprice that is another question.  Generally it won't, as a 
consensus of analysts valuations, including company profits, is built 
into the share price already. SNOOPY



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