stock-analysis

Files (61)

• SKILL.md
• evals.json · evals/
• synthetic-ar-excerpt.md · evals/fixtures/
• synthetic-drhp-excerpt.md · evals/fixtures/
• README.md · examples/
• forensic-analysis-example.md · examples/
• standard-analysis-example.md · examples/
• 01-data-sourcing.md · references/
• 02-core-factors.md · references/
• 03-earnings-quality.md · references/
• 04-balance-sheet-and-cashflow.md · references/
• 05-returns-and-dupont.md · references/
• 06-valuation.md · references/
• 07-forensic-red-flags.md · references/
• 08-governance.md · references/
• 09-risk-and-macro.md · references/
• 10-peer-set.md · references/
• 11-scoring-rubric.md · references/
• 12-report-template.md · references/
• 13-situations.md · references/
• 14-accounting-comparability.md · references/
• 15-document-diligence.md · references/
• 16-market-mechanics-and-tax.md · references/
• 17-process-and-epistemics.md · references/
• 18-forensic-mode.md · references/
• 19-ipo-mode.md · references/
• 20-challenge-pass.md · references/
• 21-data-integrity-tools.md · references/
• _index.md · references/sectors/
• auto.md · references/sectors/
• aviation-hotels.md · references/sectors/
• banks.md · references/sectors/
• biotech-clinical.md · references/sectors/
• chemicals-cement.md · references/sectors/
• exchanges-payments.md · references/sectors/
• fmcg-consumer.md · references/sectors/
• holdco-assetmgr.md · references/sectors/
• infra-capitalgoods.md · references/sectors/
• insurance-brokers-services.md · references/sectors/
• insurance.md · references/sectors/
• it-saas.md · references/sectors/
• metals-mining.md · references/sectors/
• mortgage-reit-specialty-finance.md · references/sectors/
• nbfc.md · references/sectors/
• oil-gas.md · references/sectors/
• people-businesses.md · references/sectors/
• pharma-healthcare.md · references/sectors/
• rail-freight.md · references/sectors/
• realestate-reit.md · references/sectors/
• retail-ecommerce.md · references/sectors/
• semiconductors.md · references/sectors/
• shipping-logistics.md · references/sectors/
• telecom-media.md · references/sectors/
• utilities-power.md · references/sectors/
• waste-environmental.md · references/sectors/
• benchmarks.json · scripts/
• lint_report.py · scripts/
• ratios.py · scripts/
• score.py · scripts/
• valuation.py · scripts/
• …and 1 more

SKILL.md (first lines)

# Stock Analysis

Produce an evidence-backed fundamental analysis of one company, benchmarked against the right peers, and delivered as a written report plus a sector-relative scorecard.

## The principle that governs everything here

**A financial metric carries no meaning until you know the sector it came from and the company's own history.**

If X earns a 20% operating margin and Y earns 30%, that tells you nothing about which is the better business. Y may be in software (where 30% is mediocre) and X in distribution (where 20% is exceptional). Y's 30% may need three times the capital to produce, so X earns a far higher return on the money invested. Y's margin may be eroding while X's compounds.

Two consequences shape this whole skill:

1. **Never rank companies on a single metric.** Every judgement combines profitability, returns on capital, cash conversion, balance sheet, growth durability, governance, and price.
2. **Compare like with like.** Benchmark against sector peers or against the company's own multi-year record — never a raw cross-industry number. For banks, insurers, REITs and miners the standard ratios are not merely less useful, they are *undefined or inverted*; those sectors need their own metric set entirely.

Read `references/05-returns-and-dupont.md` for why return on capital, not margin, is the metric that actually determines compounding.

## Non-negotiables

### Never invent a number

This is the failure mode that destroys the value of the whole analysis. A fabricated revenue figure or a hallucinated ROCE produces a confident, well-formatted, *useless* report — and the user may act on it.

- Every figure carries a **source and a period** ("FY25 annual report, consolidated, p.112" / "10-K FY2024, Item 8" / "Q3 FY26 quarterly results filing, BSE").
- If a number cannot be sourced, write `not available` and say what would be needed. An analysis with acknowledged gaps is far more valuable than one with invented precision.
- Cross-check headline figures (revenue, net profit, debt, cash) against a second source when possible — at least one of the two must be a primary document.
- **Every financial figure in the analysis must trace to a primary document** — annual report, 10-K/10-Q, quarterly results filing, concall transcript, investor presentation, DRHP/RHP, exchange filing, or rating rationale. Aggregator websites (screener.in, Yahoo Finance, Tikr, etc.) are navigation aids for locating documents and optional labelled cross-checks — they are never a source of record. The one exception is current share price and market cap, which are inherently sourced from exchange or finance websites and must carry an as-of date.
- State **consolidated vs standalone** explicitly — for any company with subsidiaries these differ materially, and mixing them silently invalidates every ratio.
- State **currency and units**. Indian filings use crore/lakh; US filings use millions/billions. Getting this wrong by 10x is a common and embarrassing error.
- Flag stale data. A price or multiple without an as-of date is not usable.

Detailed sourcing routes and a verification protocol: `references/01-data-sourcing.md`.

### Official records are the source — and they hold far more than the financial statements

Two failure modes hide behind a report that looks well-sourced. Guard against both.

**First: the source of record is the company's own filings — nothing else is.** Rank sources by how many hands the number has passed through, and cite only the primary one:

1. **Primary filings** — annual report / 10-K, exchange filings (NSE/BSE, SEC EDGAR), quarterly results, the offer document (DRHP/RHP/S-1), audited statements.
2. **Company-published secondary** — concall transcripts, investor presentations, earnings releases.
3. **Regulator / third-party primary** — SEBI/MCA/ROC records, credit-rating rationales, exchange shareholding and pledge data.

Third-party research notes, brokerage reports, news articles and data aggregators (screener.in, Tikr, Yahoo/Google Finance, trendlyne) are **navigation and cross-check aids only** — they exist to help you *locate* the filing and to flag an outlier worth investigating. An aggregator or news figure must never be the thing you cite; when it disagrees with the filing, the filing wins and the disagreement is itself a finding. The one standing exception is live share price and market cap, which carry an as-of date. If a figure exists only in an aggregator and cannot be traced to a filing, it is `not sourced` — say so.

**Second: a filing is not just its three financial statements.** Most of what actually decides an analysis is the **non-financial** disclosure wrapped around the numbers, and it must be read and used as a first-class input — not skimmed on the way to the P&L:

- the **business, strategy and risk-factor** sections — what is sold and to whom, the stated moat, and the risks management is legally obliged to admit;
- **MD&A** read across 3–5 years — growth decomposed into volume / price / mix, capacity, capex plans, order book, guidance, and the drift between what was promised and what was delivered;
- the **auditor's report, CARO annexure, Key Audit Matters and emphasis-of-matter** — the auditor's own map of where the numbers are fragile;
- **related-party transactions, contingent liabilities, litigation and capital commitments** — the commonest routes for value to leave a minority shareholder, and quantifiable in one sitting;
- **governance and ownership** — board and audit-committee composition and independence, promoter holding trend and pledge, remuneration versus profit, auditor tenure and any resignation, AGM voting dissent, ESOP dilution;
- **segment and operational data** — segment-level revenue, EBIT and capital employed (segment ROCE is usually the report's most surprising number), plus the sector KPIs — capacity utilisation, occupancy/ARPOB, ANDA filings, same-store growth, order-book conversion — that never appear in the income statement;
- **ESG/BRSR, secretarial audit (MR-3), and subsidiary (AOC-1) disclosures.**

`references/15-document-diligence.md` is the runbook for extracting all of this, with a time-boxed reading order. Treat it as part of the core workflow, not an optional deep-dive: an analysis built only on the income statement, balance sheet and cash flow has read perhaps a fifth of the official record and skipped the four-fifths where the moat, the governance and the landmines live.

### Analysis, not advice

Produce analysis, evidence, and a reasoned view of business quality and valuation. Do not produce personalised investment advice, position sizing for the user, or buy/sell instructions framed as recommendations for their money. State clearly that the output is research, not licensed financial advice, and that the user is responsible for their own decisions.

Presenting a bull case, a bear case, a valuation range, and what would falsify the thesis is genuinely useful and stays on the right side of this line. "You should buy 50 shares" does not.

### Show the reasoning and the uncertainty

Where an estimate is used (normalised earnings, maintenance capex, mid-cycle margins), say it is an estimate, give the assumption, and show what changes if the assumption is wrong. False precision — a target price to two decimals off a hand-waved growth rate — is worse than an honest range.

## Choose a depth mode

Match effort to what the user asked for. Announce which mode you are running so expectations are set.

| Mode | When | What it covers |
|---|---|---|
| **Screen** | "quick take", "is this worth looking at" | Stages 0–3 plus valuation sanity check. Kill criteria, headline quality metrics, obvious red flags. Short verdict. |
| **Standard** (default) | "analyse this stock" | All stages, moderate depth per stage, full scorecard and report. |
| **Deep dive** | "detailed", "thorough", "maximum depth", or a position the user intends to size | All stages at full depth, situation playbook, document-level diligence, forensic pass, scenario valuation, explicit bear case. |
| **Forensic** | "is the profit real", "are they cooking the books", "cash flow doesn't match profit", "check the accounting" | A different question entirely — *can these accounts bear weight?* Skips business quality, growth and valuation. Follow `references/18-forensic-mode.md`. |
| **IPO** | The company is **not yet trading** — an open or upcoming IPO, a filed DRHP/RHP, "should I apply to X's IPO" | No market price and no public track record, so own-history benchmarking and market-price valuation are both unavailable. Follow `references/19-ipo-mode.md`. |

## The workflow

If you are running **Forensic mode**, stop here and follow `references/18-forensic-mode.md` instead — it has its own stages (F0–F5) and its own verdict scale, because "can I trust these numbers?" is not answered by a shorter version of "is this a good investment?".

If the company is **not yet listed**, stop here and follow `references/19-ipo-mode.md` — stages I0–I7. The workflow below assumes a traded security with a price and a public reporting history, and an IPO has neither. Note the boundary: a company that has *already listed* within the last two years uses this workflow with the recent-IPO overlay in `references/13-situations.md` §8, not IPO mode.

Otherwise work through these stages in order. Later stages depend on earlier ones — classifying the sector before you compute ratios is what stops you applying the wrong metric set.

### Stage 0 — Establish identity

Pin down exactly what is being analysed before touching numbers:

- Company, exchange, ticker, ISIN. Resolve ambiguity (many names collide across exchanges).
- **Which security**: ordinary shares, dual-class/DVR line, ADR/GDR, or a holdco that owns the operating company. These trade at different prices and confer different rights.
- Reporting currency and fiscal year end (needed to align peers).
- Consolidated or standalone basis for the analysis (consolidated is almost always correct).
- Market cap, enterprise value, free float.

If any of these do not exist because the company has not begun trading, you are in IPO mode — go to `references/19-ipo-mode.md`.

### Stage 1 — Acquire data

Follow `references/01-data-sourcing.md`. This is a **document-first** workflow: obtain the raw company documents before extracting any numbers.

**Step 1a — Document acquisition.** Before touching any numbers, identify and obtain the following documents (or as many as are available):

- Latest annual report or 10-K (and ideally the prior 4 years)
- Last 4–8 quarterly results filings from the exchange
- Latest 2 concall / earnings-call transcripts
- Latest investor presentation
- Quarterly shareholding pattern filings (last 4–8 quarters)
- Latest credit rating rationale
- DRHP/RHP if listed within the last 3–4 years

Source these from the company's investor-relations page, NSE/BSE corporate filings, SEC EDGAR, or equivalent primary repositories. Aggregator websites (screener.in, Tikr, Yahoo Finance) may be used to *locate* these documents — for example, screener.in links to underlying annual reports and concall transcripts — but the aggregator page itself is not the document.

**Step 1b — Extract the financials.** From the documents obtained above, gather at minimum 5 years of income statement, balance sheet and cash flow; quarterly trend for the last 8 quarters; and the shareholding pattern. Every figure must cite the specific document and page/section it was extracted from.

**Step 1c — Extract the non-financial record too.** The financial statements are only part of what these documents contain, and often not the part that decides the analysis. From the *same official documents*, extract and carry forward — each with its document and page/section cite:

From AlenSarangSatheesh/Indian-Stocks-Fundamental-Analysis-SKILL, MIT.