Find out how thinkorswim’s mobile company profile tool can help investors uncover what drives value in a company.
Key points to remember
- The company profile tool can help investors discover what drives a company’s value
- Investigate revenue-generating divisions of companies and get a breakdown of what drives particular areas
- The tool can help investors know if company stocks are potentially overvalued or undervalued
While many investors use the thinkorswim® Mobile platform to make quick and convenient transactions, the platform also has sophisticated analytical tools, such as the Company Profile tool, that can help investors go beyond bases. Available on the tablet and mobile versions of the thinkorswim mobile app, the Company Profile tool allows investors to perform deeper analysis to discover what drives a company’s value.
Additionally, this tool gives investors the ability to perform their own what-if scenarios given their investment assumptions about a company’s future performance and can ultimately help them make investment decisions. Unfortunately, the Company Profile tool is not available to all companies. However, it is available on 169 stocks—most being larger, well-known actions—investors may therefore consider adding this tool to their stock analysis repertoire.
To access the Company Profile tool, log in to thinkorswim Mobile, upload an action to the short quote menu, then select Profile from the choices available at the top of the page. Once the results are displayed, you’ll see an interactive chart of the company’s revenue-generating divisions (see Figure 1). Each division is represented as a percentage of market capitalization or company value.
As shown in Figure 1, General Electric (GE) derived most of its market capitalization value from its Aviation (52.2%) and Healthcare (32.3%) segments. Other divisions, and even cash balances, can be seen if you scroll down the screen.
Of course, depending on the company profile you are viewing, you may see very different revenue generating divisions for that company. A pharmaceutical company can be broken down by the categories of drugs it sells. A snack business can be broken down by the regions of the world in which it operates. Every business is different.
Also, above where these divisions are listed on the screen, there is a East Trefis price. for the business, which is a comparison of the Trefis estimate of the “true value” of the business as generated by this pricing model against the current market price of the business. In the GE example, this price estimate shows that, according to the Trefis model, GE is worth 18% less than what the market currently values for the stock. Note: Company Profile (Trefis) ratings are provided by Insight Guru, a separate, unaffiliated company. Remember that stock prices are influenced by many factors and estimates of future stock prices provided by the tool are not guaranteed, but it is a quick way to get a different perspective on value. from a company.
However, your analysis should not stop there. By selecting a particular value area, you can view a breakdown of what is driving that split. In the GE example, selecting Health care generates this screen (see figure 2):
As you can see, this has generated some key performance drivers for GE’s Healthcare division, as well as forecasts for the next five to seven years or so in this area. For example, its EBITDA margin in the healthcare sector is expected to reach 28.15% and remain stable over the next five years. But what if this Trefis model does not match your expectations for the company?
A great feature of the Company Profile tool is that users can modify the forecast for the selected value driver, which in turn can modify the split chart, as well as the resulting value for that split. To change the value driver estimate, select the particular forecast you are interested in, and you will see a chart including bars, which can be selected and dragged up or down, revising the future forecast ( see Figure 3).
FIGURE 3: SITTING ON THE DRIVER’S SEAT. Select the particular forecast you’re interested in, and you’ll see a graph appear that includes bars, which can be selected and swiped up or down to revise future forecasts. Source: thinkorswim Mobile. For information.
In the case of GE, the increased healthcare EBITDA margin will ultimately result in a higher estimate for that division and therefore for the entire business; similarly, dragging the handlebars down will result in lower estimates. You can compare the new estimated value to the current market value of the stock or to Trefis’ original estimate, which can help you decide whether you think the market price of the security is currently overvalued or undervalued. There is a Reset Chart that you can use to easily run repeated evaluation scenarios.
One of the challenges that many equity investors face is how one facet of a company’s performance can affect the whole company and, therefore, its stock price. Reading the news and listening to experts can help, but having the ability to easily model the effects of different financial metrics on a company’s share price can take your analysis to a whole new level. The company profile may be the tool you need to do just that. So the next time you access your thinkorswim mobile app, check the company profile for the stocks you’re interested in.
Third-party research tools are provided for informational purposes only. TD Ameritrade does not warrant its accuracy, completeness or suitability for any purpose, and makes no warranty as to the results to be obtained from its use.
Please consult other sources of information and consider your financial situation and objectives before making an independent investment decision.
Past performance does not guarantee future results.