AI Skill Report Card
Analyzing Stock Fundamentals
Stock Fundamental Analysis
Quick Start15 / 15
Provide a stock ticker/name and I'll analyze it using Warren Buffett's investment framework:
Example: "Analyze AAPL" or "Analyze Reliance Industries"
I'll return:
✅ Fundamental Score: 34/42 (Strong)
✅ Key Strengths: 22% ROE, Debt/Equity 0.12, FCF Growing
⚠️ Concerns: High P/E vs sector
📊 Verdict: Strong fundamentals, wait for better price
Recommendation▾
Reduce repetition between 'Best Practices' and 'Fundamental Scoring Framework' sections - consolidate scoring thresholds into one place
Workflow15 / 15
Phase 1: Company Understanding
- Business model (what they sell, how they make money)
- Industry position and competitive moat
- Recent developments and management quality
Phase 2: Financial Health Check
- Pull 5-year financial statements
- Calculate profitability ratios (ROE, ROCE, margins)
- Assess debt levels and cash flow quality
- Check liquidity and growth metrics
Phase 3: Scoring & Decision
- Apply 42-point fundamental scorecard
- Identify red flags or strengths
- Compare valuation to intrinsic value
- Provide buy/hold/avoid recommendation
Recommendation▾
Make the 42-point scorecard calculation more explicit - show how the 21 factors map to the total score
Examples17 / 20
Example 1: Input: "Analyze Microsoft (MSFT)" Output:
MICROSOFT CORPORATION (MSFT)
Business: Cloud computing, productivity software, gaming
FUNDAMENTAL SCORECARD: 38/42 (STRONG)
✅ ROE: 47% (exceptional, consistently >15%)
✅ ROCE: 28% (excellent capital efficiency)
✅ Debt/Equity: 0.31 (conservative)
✅ Interest Coverage: 15x (safe)
✅ FCF: $65B growing (cash machine)
⚠️ P/E: 28 vs sector 24 (slight premium)
MOAT: Strong (network effects, switching costs)
VERDICT: High-quality compounder, fair price
Example 2: Input: "Check Paytm fundamentals" Output:
PAYTM (ONE97)
Business: Digital payments, financial services
FUNDAMENTAL SCORECARD: 18/42 (WEAK)
❌ ROE: -47% (burning shareholder money)
❌ FCF: -₹1,800cr (cash drain)
❌ Interest Coverage: Negative
✅ Revenue Growth: 39% CAGR
⚠️ High competition, no clear moat
RED FLAGS: Negative cash flow, dilutive equity raises
VERDICT: Avoid until profitability achieved
Recommendation▾
Add one more concrete example showing a 'moderate' scoring company (27-32 points) to demonstrate the middle tier
Best Practices
Data Sources Priority:
- Company annual reports (10-K, investor relations)
- Screener.in, Macrotrends (pre-calculated ratios)
- Exchange filings (BSE/NSE/SEC EDGAR)
- Cross-verify key numbers across sources
Scoring Logic:
- Each factor: PASS=2, WARNING=1, FAIL=0
- Maximum score: 42 points
- Strong: ≥80% (33+ points)
- Moderate: 65-79% (27-32 points)
- Weak: <65% (<27 points)
Industry Context:
- Always compare ratios to sector peers
- Tech: Higher P/E acceptable, focus on growth
- Banks: Different debt metrics, focus on NIM/CASA
- Utilities: Lower growth, focus on dividend stability
Common Pitfalls
Never Do:
- Rely on single quarter results
- Ignore debt levels for high ROE
- Buy based on tips without analysis
- Compare P/E across different sectors
Red Flags (Auto-Reject):
- Operating cash flow negative while showing profit
- Interest coverage below 1.5x
- Debt-to-equity above 2.0 (non-financial companies)
- Promoter pledging above 50%
- Frequent equity dilution to fund operations
Quality Checks:
- Earnings backed by cash flow (OCF ≈ Net Profit)
- Consistent performance across economic cycles
- Management integrity and capital allocation
- Sustainable competitive advantages (moats)
Fundamental Scoring Framework
Core Metrics (Pass/Fail Thresholds)
Profitability:
- ROE: ≥15% (Pass) | 10-15% (Warning) | <10% (Fail)
- ROCE: ≥15% (Pass) | 12-15% (Warning) | <12% (Fail)
- Net Margin: ≥10% (Pass) | 5-10% (Warning) | <5% (Fail)
Leverage:
- Debt/Equity: <0.5 (Pass) | 0.5-1.0 (Warning) | >1.0 (Fail)
- Interest Coverage: >3x (Pass) | 1.5-3x (Warning) | <1.5x (Fail)
Cash Flow:
- Operating CF: Positive 5/5 years (Pass) | 3-4/5 years (Warning) | <3/5 years (Fail)
- Free Cash Flow: Growing (Pass) | Flat (Warning) | Negative (Fail)
Growth:
- Revenue CAGR (5yr): ≥10% (Pass) | 5-10% (Warning) | <5% (Fail)
- EPS CAGR (5yr): ≥10% (Pass) | 5-10% (Warning) | <5% (Fail)
Use this framework to systematically evaluate any stock's fundamental strength and investment merit.