How to quickly leverage online financial tools to perform stock valuation, such as analysing its balance sheet, calculating profit margin, determining cash assets per share, and calculating the percentage return on free cash flow, before reading the long hundreds of pages of balance sheets. How to perform valuation of the stock, like calculating the Discount Cash Flow (DCF) value, or screening the stock market to find the stock with little institutional ownership? How to know the expert opinion regarding a particular stock and determine whether it comes under the growth, cyclical, or consumer staples category? How to view the historical record of the earnings with price?
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In this post, I will take you through one of the best financial tools I have been using extensively for stock valuation, without paying a penny. Technology has come a long way, and online financial tools have evolved, too. With platforms like Yahoo Finance and Zacks, you can access in-depth stock analysis instantly. Before diving deeper into demonstrating the use of these online financial tools, I will pick one stock as an example. This will help in explaining how to extract meaningful information for the stock’s financial health. Let’s take Apple stock (Ticker symbol: AAPL) as an example.
What Financial Information to Extract from Yahoo Finance?
Yahoo Finance is also one of the best tools to build your portfolio, keep up with the latest news, look for markets, research, and watch online financial news. Whether you are a student or a seasoned professional investor, Yahoo Finance covers most aspects of the financial items that you need on your market radar.
Personally, I use Yahoo Finance to check out the financial statements of the companies. Let’s say I want to check out the Apple stock. I just searched for “Apple” in the Yahoo Finance search bar, followed by clicking the “Financial” item, and voila, three nice tabs are at your service with the tags of balance sheet, cash flow statements, and income statements. I don’t have to wander on the internet and search through the company’s databases to find the latest financial statements. It saves me a lot of hassle, and I can easily use it along with Microsoft Excel to do the stock valuation in just a few minutes.
First, I will visit Yahoo Finance to check the latest Earnings Per Share (EPS), revenues in the most recent years. Then I will check the balance sheet to note the cash and cash equivalents, long-term debt, current assets, current liabilities, the number of outstanding shares, and the free cash flow.
In the Table below, I extracted the most valuable information from Yahoo Finance about Apple stock.
| Revenue section | Balance Sheet Section (Numbers in Million) | Cash Flow section | ||||||
| Cash & Cash equivalents | Shares Outstanding | Long-term debt | Current Debt | Long Term debt | Current Assets | Current Liabilities | Shareholder equity | Free Cash Flow |
| 6.08 | 15116.786 | 65,171 | 20,879 | 85,750 | 152,987 | 176,392 | 56,950 | 108,807 |
Afterwards, I can evaluate the financial strength based on widely used metrics. For example, looking at the Table above, we can compute the cash per share as follows.
Cash per share = (Cash & Cash Equivalent – Long-term debt)/ Shares outstanding
Cash Per Share (Apple) = 65,171 – (85,750+20879) /15,116.786 Million = -2.74
Therefore, Apple has -2.74 cash per share, which is a potentially weak sign. However, this might be offset by the company’s equity per share. The equity per share of Apple is $3.77. Subtracting the equity per share from the negative cash per share, we arrive at $1.02. The debt minus cash & cash equivalents to shareholder equity is then 72%. This further verifies a worrying sign of the company’s weak financial position.
Next, we can compute the liquidity ratio, which is the current assets divided by the current liabilities.
Liquidity Ratio (Apple) = 0.87
The liquidity ratio of 0.87 shows that the company has more short-term liabilities than current assets, showing another potential weak sign. Usually, a company should have a liquidity ratio higher than 1, showing the potential to overcome its short-term liabilities.
We can also compute the percentage return on the free cash flow per share. The formula is:
% return on free cash flow per share = (Free Cash Flow Per Share/ Current Share price) * 100
% return on free cash flow per share = 2.79%
The total return on free cash flow per share is 2.79%, which is not quite attractive. Another important thing to note is the long-term debt, short-term debt, and shareholder equity. A good company has 75% equity and 25% debt.
Apple has 50.57% more long-term debt compared to stockholder equity, which is an alarming sign. A good company has 75% equity and 25% debt. In the case of Apple, the company has more debt than shareholder equity.
We can summarize all our analysis in the Table below to evaluate the benefits and drawbacks of Apple.
| Annual P/E | Cash per share | Liquidity Ratio | Return on Free Cash Flow per Share | Shareholder equity to long-term debt |
| 42.85 | -1.36 | 0.87 | 2.79% | -50.57% |
Comparing all the results, we found that Apple stock may be overvalued in the current scenario. However, it should be noted that Apple stock has its own brand value that cannot be neglected, which leads us to visit Zacks.com.
Important Financial Information from Zacks
This website provides a nice tool to check the status of the stocks. The Zack provides the following features for the stocks. Zack Ranks, Style Scores, and Industry Ranks.
The Zack Ranks range from 1 to 5, which shows the short-term rating of the stocks for the next 3 to 5 months. The Zack rank 1 corresponds to a “Strong Buy” signal, whereas 5 refers to a “Strong Sell” signal, and a value of 3 indicates a “Hold” signal.
The Zack Style Scores range from A to F, with A being better than B, B better than C, and so on. This score is given to the stock based on three categories: Value, Growth, and Momentum. There is also another score called VGM, which is the average score of these three categories. The industry ranking shows the average ranking of the stock in the industry.
However, the important aspect is to watch the fundamental chart showing the Earnings (TTM) vs the Price. This curve provides more information on whether the stock price is in line with or is deviating from the earnings. This type of curve has been used by Peter Lynch in his book titled “One Up on Wall Street” for checking the valuation of the stock. Seeing the fundamental chart of Apple, we noticed that there is no significant deviation of the price from the earnings curve, which is a positive sign. In the Table below, I sumamrized the results for Apple stock from Zacks.com.
| Zack Rank | Style Score | Industry Rank | EPS Diluted | PEG Ratio |
| 3 (Hold) | VGM | Top 18% | In line with the price | 2.50 |
Clearly, the Apple stock has the characteristics of value, growth, and momentum. However, given the current financial conditions, it may not be an attractive choice for investment.
In summary we can get more valuable information from these financial tools beside the conventional P/E ratio, price tags, dividends, earning per shares, P/B ratio, etc. I am not giving an impression that these metrics are not useful. The are surely useful for initial stock analysis and valuation, however they carry little information in revealing the company actual financial strength.
Automating the Stock Screening with Finviz.com
The final question would be how to search for the stocks that have a low debt-to-equity ratio, low PEG, and low P/E ratio. That’s what leads us to Finviz.com. The Finviz provides a free stock screener based on fundamentals, sectors, and markets. One can screen the stocks based on their favorite valuation metrics with just a click.
Additional Tools for Stock Analysis
Other tools like Guru Focus and “Simply Wall Street”, however, have the downside that most of their services are locked behind a paywall. Nevertheless, I will provide a summary of these tools and their highlighted features.
Stock valuation could be a tedious task, especially when you have to deal with complicated terms like “Discounted Cash Flow Model (DCF)”, “Return on Investment (ROI) “, and many more. But the Guru Focus is there to rescue you. While some of its services overlap with Yahoo Finance, other services are unique, such as its “fair value trend”. For example, if I search for the “Apple” stock valuation, Guru Focus will provide me with a very detailed summary, accompanied by a nice graph showing the trend in fair value, and also indicate whether the stock is overvalued or undervalued.
One can also install the app, which is readily available on the Google Play Store and App Store. Perhaps one of the nicest things about Guru Focus is its fair value trend that shows whether the stock’s fair value is expected to rise or fall, and how much deviation of the stock’s current price deviates from the fair value. Another great option is its “DCF calculator” that allows you to compute the fair value of the stock based on discounted cash flows. The last one that I really like is the Guru Trades, and to keep an eye on where the seasoned investors are investing.
If you want to get the latest insights into the stocks, comparison with the peers, fair value analysis, and institutional ownership of the stocks, then this platform is the best for you. It provides you with a very detailed fair value analysis taking into account the analyst estimates, valuation metrics of the stocks, etc, to reach a fair value estimate. Furthermore, it can allow you to check the future growth and past performance of the stocks, the financial health, and the dividend. Additionally, the important feature that it provides is the information about the Management and the Ownership of the stock. For instance, you can check whether the management is selling or buying stock, or the institutional ownership of the stock.
The downside of this platform is that it will only provide you with such analysis for a few stocks. Therefore, to enjoy the reports for unlimited stocks, you need to apply for its membership.
Final Note
Although there are numerous financial tools for stock analysis, besides a few that I have mentioned. The two financial tools, like Yahoo Finance and Zacks.com provide free financial information that can be more valuable with some knowledge of the famous ratios. Most other financial tools, although they provide more comprehensive and detailed analysis, have their services locked behind a paywall.
If you want to get further information about starting investing in stocks, you can read my beginner guide to stock picking, that provide essential information for stock picking.