How Our Latest Updates Are Revolutionising UK Investment Software!

25th May '12 by Edward Croft

9 comments 7955 reads

What investors need is data that is not only reliable but completely 100% up to date. Companies report their full results once per year at which point most vendors of fundamental information update their data sets. Due to the rigour of accounting and auditing results these numbers are often not released for three or four months after the actual year end.

This can mean that the data that financial websites and desktop software products use for creating key financial ratios can be up to 15 months old.

Why this matters

How can any sensible investor make wise investment decisions based on 15 month old data? If you want to know the P/E ratio, EPS Growth rate or Return on Equity of a stock, you need to know that the numbers are as up to date as possible. If a company has fallen on hard times during the interim or quarterly reporting period the ratios should reflect that. If the company’s debt levels have soared or financial health deteriorated according to key ratios like the Altman Z-Score you really need to know and act on it quickly. Game Group was a classic example where the interim accounts highlighted a severe risk of bankruptcy which was less apparent at the year end accounts. If you’d incorporated the interim data into your analysis you’d have been much safer.

What we've done

We decided to tackle this problem head on in the latest update to Stockopedia’s Premium services by upgrading all our key fundamental ratios to include any quarterly or interim data that has been reported. Ratios built on such a data set are known as ‘TTM’ (trailiing twelve month) ratios in the industry and have for the most part been very unavailable on websites. Some websites do quote a few TTM ratios but never to the extent that we are making them available.

Literally our entire codebase has been rewritten to enable TTM calculations across not only all financial statements, but also across all our scoring systems (F-Score, Z-Score, M-Score), rankings and our growing library of the best stock screening strategies on the web. We are incredibly excited about these upgrades as not only do we know the impact this can have on investment returns but we also know there's nobody else in the UK or possibly the web with a data set…

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emptyend

25th May '12

We just introduced Trailing 12 Month Data! Find out why this puts us on the bleeding edge of UK investment services

Some of us have been on the bleeding edge for quite a while!! However, I suspect that is a more traditional sort of bleeding edge......

....what happened to the good old English "cutting edge"? Not sharp enough for some bleeders, perhaps? ;-)

More seriously .....all good stuff. I'll probably get into it a little later in the year.

Ilostalot

Nice article just dont understand what it all means at the moment Re my name!!!!!!!!

Mutandis13

An excellent addition to the data, providing a more up to date analysis of some ratios and greater clarity on income and balance sheet trends. This will certainly save a substantial amount of time when analysing the affect of quarterly or interim results on an existing or potential investment.

Edward Croft

Just to clarify what trailing twelve month (TTM) figures actually are I should have included a worked example.

If a company has reported EPS in 2011 of 5p at the half year (interim) stage and 10p for the full year at a price of 100p it would be on a historic P/E of 100/10 = 10x.

But if the company then reported interim 2012 EPS of 10p then the TTM ('trailing twelve month') figure would be the sum of first half 2012 EPS + second half 2011 EPS = 10p + 5p = 15p. The TTM P/E ratio would then be 100 / 15 = 6.6x

Clearly incorporating the interim or quarterly announcements makes the P/E far more current and up to date. Once you start extending this calculation to profit margins, profitability, scores, rankings and so on you can imagine the difference it makes to the kinds of companies qualifying for different screens and strategies. If hedge funds rely on this kind of currentness to gain their edge you should too!

jseth123

26th May '12

Hi Ed,

What is the source of your data? If a company announced interims on Monday when would they be reflected on your database?

Best,
JS123

Hi JS,

Our financial statements and estimates data is predominantly supplied by Thomson Reuters - generally regarded as having the highest quality database in the business.

This data is imported every night at 1am, so generally all results statements are updated for the following day. For some smaller companies during busy reporting periods it can take an extra day for the fundamentals to be updated.

We then have an extensive process that computes approximately 1200 ratios for each company and runs screening process on the resulting data set.

Hope that makes it clear!

loglorry

28th May '12

While it is always good to have a screening tool at your disposal, this is just the first step. I can't think of a single investment that has really worked out well for me, which hasn't had some sort of twist or detail that would never show up in a stock screener.

I don't subscribe but I'd be interested to see how these ratios stack up for a stock like TNI in particular the net debt figures. TNI is interesting because it reports a large future tax liability for good will. Clearly this can't be taken into account when working out tangible assets if the goodwill is also not included. This makes TNI look very cheap and virtually debt free when you take into account freehold property they own.

My point therefore is that stock screeners often miss these very salient points and can be dangerous in the sense of missing opportunities or else flattering accounts. There is really no substitute from looking carefully at accounts and a very good discussion of companies on blogs like Stockopedia.

Just my two p worth.

Log

snickers

a question and a couple of observations..

first of all, about the data. i happened to have left the big page for Elementis open overnight before your change to TTM data, so i got the chance to compare before and after. ..some changes to current valuations, it's passed 2 more screens, added 1 to its P-score, but also there are some new numbers for 2006-2008. i was wondering how come? so echoing loglorry above i'm sure there's no excuse for not double-checking the actual first hand accounts before making any big decisions.

i also had a stock screen left open, so i have that before and after - it showd quite a lot of change. i went through it to see if firms that had dropped out had seen a fall in share price - new entries a surge - and survivors a stable price. a few anomalies, including Elementis (still rising despite exiting the screen) and Kentz (still in, though fallen). Hopefully Kentz is only under a cloud thrown by Cape and Lamprell. If it tanks shortly i'll ask for a before-and-after button on the site, maybe also the price of a cup of tea.

3rd thing is about the CAGR. here's a graph..

cagr

this is ELM's eps (black line, 2006 to 2013e) and some CAGRs worked out from it, going through the rainbow with red being the 1-year rate. As the years pass you get the chance to work out longer periods, so more lines appear. the grey line is the average of the coloured ones. stockopedia use a 3year period for recent history.. yellow line.. but it looks like a bit of a random choice. No particular point to the observation, i'm just taking less and less for granted!

Regarding the Piotroski Score that ticked 'up' - it's likely because we redefined one of the F-Score criteria to even more closely match the original paper (by using a <= sign rather than a < sign for ). We split hairs over these things to make them as accurate as feasibly possible to the original academic paper.

re. Elementis passing 2 more screens. The screen criteria have all been updated to run off TTM data, so there have been a lot of changes. When very many companies have rapidly deteriorating financials a strong company like Elementis will look even stronger on a TTM basis versus weaker companies - hence other companies may have fallen lower down the lists on a ranking basis allowing ELM to qualify.

re. New numbers - we have audited as much as humanly (and computerly) feasible - if you have found any anomalies do let us know.

Regarding CAGRs - we have 1 year, 3 year and 5 year available as table columns so we aren't really choosing between them. The financial summary lists a max of 6 year CAGR depending on the depth of financials so there's no point duplicating that number. We use 3 year CAGR in the recent history as growth investors ( a la Slater / O'Neil et al) tend to focus on them.

How our latest updates are revolutionising UK investment software!

Why this matters

What we've done

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Edward Croft

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