The calculations section is not required for your success with Tykr. This section is simply here to provide you with a little more context behind the calculations that power Tykr including the Summary, Score, MOS (Margin of Safety), and Fair Value.
One of our goals is to remove the “black box” of investing. We want to make investing as approachable and transparent as possible. In other words, the calculations you are about to read are open source meaning you can copy/paste to Excel for personal use.
For reference, you may download some of the Excel templates on our downloads page.
If you’re interested in making the calculations on your own and find the Fair Value, MOS, and score are not 100% the same as Tykr, that’s okay. As long as you get pretty close, that’s what matters. The numbers may vary slightly because of the data from our two data providers. For example, if the EPS for the recent quarter for a specific stock is $1.15 and in Tykr it’s $1.16, it’s not going to make a big difference on the Tykr Summary, Score, or MOS. Our two data providers are https://site.financialmodelingprep.com/ and https://eodhistoricaldata.com/.
Also keep in mind, a lot of investors get “hung up” and tend to “split hairs” regarding the Fair Value and MOS. As I learned from Warren Buffett and Phil Town, all that matters is if a company is increasing its profits. That’s what institutions look at most. Here is a good example, let’s say you found a stock that is $100 and you see the Fair Value in Tykr is $200 but you calculate the Fair Value on your own to be $150. Your next question might be, which Fair Value should I believe? The answer, it doesn’t matter. In both cases, there is a MOS which essentially tells you the business is seeing an increase in profits. That’s it! Large institutions move stocks up and down more than retail investors like you and I and they will not split hairs on the Fair Value or MOS, and neither should you. Simply look for a high MOS in Tykr but don’t dwell on the exact Fair Value or MOS.
To be completely honest, you don’t need Tykr or any stock screener to be good at investing. If you want to manually see where a stock is heading (either up or down) you simply need to read the Financial Statements (Income Statement, Cash Flow Statement, and Balance Sheet). Let’s walk through an example together. This will require a few minutes of your time but it will provide you with a general idea of where a stock is heading.
Of course, Tykr does this automatically for thousands of stocks to save you time.
This is just a high-level analysis. In this example, we’ll manually look at AAPL (Apple). Most websites like Yahoo Finance and MarketWatch provide financial information for free. In this circumstance, we’ll use Financial Modeling Prep which happens to be our primary data provider.
Click Here to see the Income Statement, Cash Flow Statement, and Balance Sheet.
Steps
- Visit the Annual Income Statement.
- The 3 most important data points are Revenue, Net Income, and EPS (Earnings Per Share Basic).
- Check to see if the numbers are increasing or decreasing over the last 5 years. If the numbers are increasing, that’s a sign the share price will increase. If the numbers are decreasing, that’s a bad sign the share price will decrease.
- Pay close attention to the EPS. If the EPS is increasing, this means the MOS (Margin of Safety) will be higher. If the EPS is decreasing, this means the MOS will be lower. As stated in Tykr, the higher the MOS, the higher potential returns you can make.
- Now visit the Cash Flow Statement.
- The most important data point to pay attention to is Free Cash Flow.
- Check to see if the numbers are increasing or decreasing over the last 5 years. If the numbers are increasing, that’s a sign the share price will increase. If the numbers are decreasing, that’s a bad sign the share price will decrease.
- Now visit the Balance Sheet.
- The 4 most important data points are Assets, Liabilities, Debt, and Equity.
- Check to see if the Assets and Equity are increasing or decreasing over the last 5 years. If the numbers are increasing, that’s a sign the share price will increase. If the numbers are decreasing, that’s a bad sign the share price will decrease.
- Check to see if the Liabilities and Debt are increasing or decreasing over the last 5 years. If the numbers are decreasing, that’s a sign the share price will increase. If the numbers are increasing, that’s a bad sign the share price will decrease. Too many liabilities and too much debt can hold a business back. This is why we want to see these numbers decreasing.
- If the Revenue, Net Income, EPS, Free Cash Flow, Assets, and Equity data points are primarily increasing and the Liabilities and Debt are primarily decreasing, this means the stock will have a higher points within Tykr. As stated in Tykr, the higher the Score, the safer the investment. In other words, the less risk.
Based on steps 1 through 12, where is AAPL’s share price heading? Up or down?
You should be able to get a pretty good idea based on the financial statements.
Thanks for checking out Tykr and we hope you enjoy reading through the calculations!