“How the hell do you look at the revenue of companies?”
That is a question asked by one of my friends, balls deep into his commitment to invest in the stock market. But he was out of his depth.
Flipping through annual reports is a snooze fest. Looking at financial statements from websites like the Wall Street Journal just created more confusion.
He was not alone. Many of my friends said the same thing. And they have effectively given up on looking at companies and investments in general.
But what if I tell you there are simple ways to look at the revenue of a company without cracking your head open?
It’s not foolproof, but it will turn a gruelling and confusing process into a 1-hour straightforward process.
Let me talk about a dummy’s guide to look at a company’s revenue!
Two Ways to Find Revenue Numbers
The first step is finding revenue numbers. There are two ways mainly.
The first is downloading the annual or quarterly report. The second is looking at financial websites such as the Wall Street Journal.
Don’t worry, we will go step-by-step.
Where do you download annual reports?
The company’s website is the most direct way. Google the name of the company, and click on the section called “Investor Relations”. From there, you can go to the section called “Financial Results”. Different companies will have different ways to navigate to the annual report, so let me talk about two companies, Maybank and Apple.
For example, for Maybank, you can click on “Investor Relations”
From there, go to the section called “Financial Reports and Presentations”, and click on “Annual Reports” or “Quarterly Announcements”.
There, you will see Maybank’s Integrated Annual Report. But where are the revenue numbers?
Click Alt-F to search and type in “Financial Statement” or “Income Statement” until you see a table that looks like this.
Most companies will give you 5-year financial results to look at. For Maybank’s case, operating revenue is the revenue number you are looking for.
What about Apple? Our beloved company is listed in the U.S.
For U.S. stocks, there is a slightly different way to look for revenue numbers.
From Apple’s website, it’s hard to find the investor relations section. It is below in very fine print with the wording “Investors” (sometimes, I think companies make it as hard as possible for us to find any financial information about them).
From here, you will need to navigate to a section called “SEC Filings”. U.S. companies are required to put most of their reports under the Securities Commissions Fillings.
Change the SEC Grouping to “Annual Filing”. Every U.S. company’s annual report is named “10-K”.
From the annual report, do the same search for “Financial Statements” until you find a table that looks like this. In Apple’s case, it provided 3 years of revenue numbers.
There is another simpler way to find revenue numbers from financial websites. Here are my recommendations:
Click on “Financials” and then “Financial Statement” or “Income Statement”, and you will get the following for all these 4 websites. This is for Maybank.
You Got the Numbers Now. So What?
My first principle when it comes to analysis — is as simple as it gets.
An increasing revenue growth trend is the best.
Steady growth is fine.
A declining revenue trend should be avoided.
Three fast and simple rules.
But how exactly do you go about this?
Excel. Or Google Sheets if you don’t have the program.
Copy the 5 years revenue data, and compute the growth rates for them. If you are having trouble with this, the formula is such
If the company grows by more than 5% every year, that is a strong company worth taking a good look at.
If it’s growing between 0% to 5% every year, that is a steady company.
If it’s registering negative growth (less than 0%), stay far far away from it.
Additionally, there is also another mathematical method which is called the compounded annual growth rate (CAGR). This method is simple. Just take the revenue in the fifth year and compare it to the first year to see how much revenue grew every year. You can do this using the CAGR calculator here.
Here is an example for Maybank and Apple.
Both Maybank’s and Apple’s revenue have increased in the past five years. From this, the CAGR is pretty strong at 5.9% and 10.2% respectively. So, they are worth taking a good look at.
What is Driving the Revenue Numbers?
But just knowing the trend is not enough for you.
My friends all want to know why. What is driving higher or lower revenue throughout the years? They want to be able to reliably predict what’s going to happen in the future.
One question is key here.
What is the main business driver for the company?
And good news. The annual report of the company has all this information
The first question is straightforward. You can take up an annual report and search “Segment” until you find the following table. Most company’s revenue is either broken down into their segmental units or countries (if they have international markets).
These two are from Maybank and Apple.
Maybank Revenue Breakdown by Business Units
Apple Breakdown by Countries
Here’s what you can do next. For Maybank, you can compute the percentage of the business units to total revenue. Financial services and corporate banking are the two biggest revenue contributors to Maybank at 53.5% and 29.7% respectively.
For you to invest in Maybank, you must monitor the performances of these business units.
Meanwhile, for Apple, it’s plain to see that America, Europe and China are the biggest countries for its businesses. So, if you are an investor, you can pinpoint these countries to gauge how well Apple is doing.
If We Want a Magic Ball, Where Can We Get It?
Which business segments have the most growth potential?
That is the natural question everyone will have when we finally get information on a company’s revenue.
No one can reliably and 100% predict a company’s performance in the future. But we can get some of that insight from the company themselves.
After all, a company knows itself the best.
Where can you get this then? The tip here is to read the chairman’s or CEO’s statement or message. For Maybank in 2023, the CEO provides these insights on the future
