Forum Topics Industry average data
SebastianG
Added 2 months ago

Hi all,

I've been spending quite a lot of time lately rehashing my understanding of a company's financial statements.

Across my reading, one thing that regularly comes up is advice to not rely on "average" data but to have regard to specific data in a particular industry. For example, if you are looking at ROE or ROA, the textbooks talk about using benchmarks of 15% and 5% respectively, but there's always the fine print of making sure these metrics accord with the particular industry in question. Therefore, we should look at competitors and the like to determine appropriate benchmarks.

I guess my question is, obviously you have to do research into competitors, but are there resources (hopefully free) which contain some general industry specific data? Like if I am looking at retail companies, is there a suite of metrics or data that I can use to generally refer to?

I am conscious not to be too specific or prescriptive in my valuation metrics as most valuations tend to be inaccurate, but if i wanted to follow the general trend and invest based on say, ROA and ROE increasing over 5 years (along with assessing profitability, revenue, margins, cash flow etc) what's the best way to go about that from a data collection perspective.

Cheers

14
PortfolioPlus
Added 2 months ago

I check these stats against the companies listed in their ASX Sector and Industry.

stockopedia is my personal share analysis program and I can then pull a list of peers and compare on a wide range of specifics.

I personally only look at averages over the last 3 reporting years as business is dynamic and recency is a better indicator of future potential.

12
UlladullaDave
Added 2 months ago

For example, if you are looking at ROE or ROA, the textbooks talk about using benchmarks of 15% and 5% respectively, but there's always the fine print of making sure these metrics accord with the particular industry in question. Therefore, we should look at competitors and the like to determine appropriate benchmarks.

Both these metrics are so idiosyncratic to a company that making comparisons across industries using the raw number is a fool's errand, imo. In the case of ROA it includes indefinite life intangibles, policies around depreciation and amortisation and in the case of, for example, retailers, large capital leases are going to muddy the water further. ROE has all the shortcomings of ROA but then goes even more company specific by being influenced by the company's mix of debt and equity. If you are going to use them for comparison you need to normalise what it is you're looking at and to do that requires more work than just pulling ratios from a data provider.

Just my 2c.

12