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Online Investing Hacks by Bonnie Biafore

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Steps to Building a Financial Analysis Template

A checklist of steps to perform and questions to ask can produce more consistent stock studies as well as better investment results.

As you gain investment experience, you’ll find that you concentrate on different items in your stock studies, sometimes adding measures, sometimes removing them, and usually improving your ability to judge whether a company’s performance is good or bad. No matter how good or bad your memory is, a checklist or set of guidelines for your unique approach to analysis will increase the consistency of your stock studies. By evaluating each company in the same way, you can compare companies with confidence and choose the best contender more often than before. In addition, constructing a template for your analysis forces you to think about what you do, which might prompt steps you’ve forgotten or highlight errors in your ways. Your template can be a simple reminder list or a sophisticated collection of tools. Either way, increased investment returns will compensate you for your time.

Asking Questions and Documenting Decisions

A stock study is an evaluation of a company as an investment. For the best results, your stock studies should analyze a company, its competitors, and the industry to which they belong to find the best investment for your portfolio. Ultimately, it should convince you that you are investing your money in the best possible way. With this definition of a stock study, two things might occur to you:

  • A stock study represents more than numbers—qualitative aspects of a company can affect your decisions.

  • Not every stock study will result in a decision to buy. You might evaluate a company or an industry and find nothing that interests you. Or, you might realize that you should sell a stock that you own and that you must perform additional studies to find a new investment. Is this common sense? Of course. However, it’s a good idea to include a question at the end of every study to document the action items you’ve identified.

The results of a qualitative analysis are often text rather than numbers. However, after you evaluate the qualitative aspects of a company, you can rank the results to compare them to competitors. Text documents and spreadsheets both work as templates for qualitative analysis. Depending on your preference, you can include both qualitative and quantitative results in a spreadsheet, or you can use a text document for the qualitative analysis and a spreadsheet for financial ratios.


If you’ve already knocked out most of the also-rans by screening stocks, starting with a qualitative analysis of the remaining companies might make the most sense.

Qualitative steps

If you haven’t developed your own approach to studying stocks, here are some ideas for items to evaluate:

Business summary

Describe the company’s business. What does the company do to make money? Does it focus on one product or does it diversify into several industries? Is it regional, national, or global in scope?


The Business section of a Value Line stock page is a great example of a business summary. The Outlook section is a concise version of business outlook. When you create your own studies, you aren’t constrained to a portion of a page, so you can document business outlook in as much detail as you want.

Business outlook

Describe positive and negative influences on the company’s business, such as acquisitions, divestitures, cost control, cost increases, management changes, successful or dismal product strategies, the economy, currency exchange rates, and competition.

Business strategy

Determine how the business grows: from acquisitions, increased market share, higher volume, higher profit margins, building stores, developing new products, or other approaches. For example, Oracle applied their productivity products to their own business to cut costs and increase earnings.

SWOT analysis is a business management technique for evaluating strengths, weaknesses, opportunities, and threats, hence the acronym. It provides a framework for analyzing a company’s current situation. SWOT analysis begins with an inward look at the company’s strengths and weaknesses, such as its product lines, management, human resources, or infrastructure. An outward look considers the opportunities and the threats present in the environment in which the company operates. For example, demographics might change consumer demand for the company’s products and services. Competitors or technological changes can affect products and prices.


When you evaluate SWOT, consider how the company has performed in the past. Good management can sometimes turn threats into opportunities and weaknesses into strengths.

Quantitative steps

Many of the hacks in this chapter discuss the purpose of financial measures and identify what to look for and what to avoid. You can use these hacks to develop your own list of quantitative items or start with one of the ready-made tools [Hack #38] , [Hack #41] , and [Hack #42] ]. If you use a ready-made tool, it’s still a good idea to create a checklist of the quantitative items you want to evaluate. You can remind yourself to research and explain unusual performance patterns or values significantly different from the industry average. In addition, you can grade the company in question on each item to see whether you want to buy it or to compare it to its competitors [Hack #71] . Here are some items you might want to include:

Growth rates

Evaluate historical growth for consistency and compare to the growth of direct competitors. Research unusual growth events, such as losses, major dips, or changing trends.


Evaluate financial measures and ratios for the company, and compare measures to the industry average and to competitors. Research above or below average performance, or positive or negative trends in the values.


If a company’s growth rates and financial ratios look good, you can take the next step of evaluating its historical P/E ratios, PEG ratio, relative value, and other valuation measures to see if purchasing at the current stock price provides you with sufficient return on your investment.

Action items

Documenting your decision and deciding what you want to do next are important steps in your analysis. Whether you include cells in a spreadsheet to grade a company’s measures or just come to a decision in your head, write down what you plan to do. For example, you might answer the following questions to conclude your stock study and prepare for your next step:

  • Does the company grow quickly and consistently enough to warrant consideration?

  • Do its business strategy and current environment bode well for continued or better performance in the future?

  • Do the company financial measures look good compared to its industry and competitors and are the ratio trends desirable?

  • Is the company at a price that provides enough total return to meet your investment objectives?

  • Would purchasing the company improve your portfolio allocation and diversification?

  • If you plan to buy the stock, are you going to buy at the current price, place a limit order, or watch the stock for a drop in price?

  • If you own the stock and plan to hold onto it, are there any items you should watch carefully?

  • If you plan to sell the stock, document your reasons. For example, if you are selling because of portfolio diversification or because the stock is extraordinarily overpriced, you might keep it on a watch list for repurchase in the future. If the company’s fundamentals have deteriorated or its business outlook is grim, you might scratch it permanently off your list.

Using a Checklist

If you often forget to include attachments with emails, you can use Word or Excel templates so you don’t overwrite your standard checklist by mistake. By creating new documents or spreadsheets from template files, you must save the document with a new name. If you store your templates in a special template folder, it’s easy to access them when you create a new file.

To save a checklist as a template, choose FileSave As in Word or Excel. Select the folder in which you want to save the template. If you are saving a Word document as a template, select Document Template (*.dot) in the File of Type box. To save an Excel template, select Template (*.xlt) in the File of Type box. Click Save.

To access your templates quickly, you can specify the folder that contains your templates for all Office applications by following these steps:

  1. Choose StartProgramsMicrosoft Office ToolsMicrosoft Office Shortcut Bar.

  2. Right-click the title area of the Office Shortcut Bar and then choose Customize.

  3. Select the Settings tab.

  4. To specify the location of all Office templates, select User Templates in the Item list and click Modify to specify the folder path.

  5. Click OK.

To use a template, choose FileNew in Word or Excel. In the New Document taskbar in Word or the New Workbook taskbar in Excel, choose General Templates under the New from Template heading. In the Templates dialog box, select the template you want to use, and then click OK to create a new file based on that template.

Clicking the New icon in the Standard toolbar creates a new blank file and does not provide a method for selecting a template.

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