Chapter 28 – Build the Comparable Company Analysis Bot Using Easy2Digital APIs
Data intelligence is not a term to show off how you are good at using data to make right decisions. I believe nobody can say we have a right stock investment decision with 100% correct prediction. Data intelligence is like an advisor giving you a way to see the big picture and inspire you with new ideas, and be along with you in the critical thinking and analysis journey. The question is how to scably and automatically collect and update the data for CCA. This is what the article is about today – FMP Bot using FMP API
Comparable company analysis is one of the most popular approaches to evaluating potential stock investment opportunities. It’s a well-known approach to evaluating private equity investment as well. Data is critical for CCA. I’m not saying the fragmented and dot-by-dot pattern of data. But I am saying that big data, data can continuously flow in.
In this article, I will show you leverage Easy2Digital APIs to build a bot scraping financial data. By the end of this Python Tutorial, you can learn what ingredients you need to create the Python script of the CCA bot, and how to find the symbol used in the script.
Table of Contents: Comparable Company Analysis Bot
- What is the source of the financials data – SEC
- Stock Market Data and Financial Data you need to scrape for the Comparable Company Analysis
- Must-have Python Libraries
- Revenue CAGR for the private eCommerce business valuation
- Free Easy2Digital API Token and Full Python Script of CCA
- FAQ
What is the source of the FMP financials data – SEC
The U.S. Securities and Exchange Commission or SEC is an independent federal government regulatory agency responsible for protecting investors, maintaining fair and orderly functioning of the securities markets, and facilitating capital formation.
U.S. Congress founded it in 1934 as the first federal regulator of the securities markets. The SEC promotes full public disclosure, protects investors against fraudulent and manipulative practices in the market, and monitors corporate takeover actions in the United States. It also approves registration statements for book-runners among underwriting firms.
Therefore, you can grab all up-to-date and reliable listed company financial datasets by using FMP API. All data is from the SEC and endorsed by the government.
Stock Market Data & Financial Data you need to scrape for CCA
In the article regarding the stock valuation using comparable company analysis, I walk through 3 primary sections of data to analyze the potential investment opportunities. For more details, please check out this article.
Stock Valuation Using Comparable Company Analysis(CCA), Finviz, FMP
Essentially for generating the multiples such as EV/Sales, EV/EBITDA, EV/EBIT, you would need the market data and financial data. Regarding the marketing data, it needs three data metrics, which are price per share, market cap, and TEV.
What’s more, you also need financial data, such as sales or revenue, EBITDA, EBIT, and earnings. FMP API provides the company’s financial income statement data. So you can utilize this API endpoint to grab the data
For the API key token, you need to subscribe to Easy2Digital newsletter by leaving us with a message “Chapter 28 + API token”. We’ll send you asap.
Comparable Company Analysis Bot – Must-have Python Libraries and Ingredients
Basically, you can generate the data using requests calling the FMP API. Meanwhile, as the FMP is the JSON data format. You need the JSON library as well in the script.
import requests
import json
import csv
import pandas as pd
import gspread
import time
from oauth2client.service_account import ServiceAccountCredentials
For the data formatting, I would recommend you use Pandas. And If you like to update the data to Google Sheets automatically, you can select gspread.
The main ingredient the script needs is the comparable company list, which requires adding the symbols. The symbol represents the specific listed company. For example, the Apple symbol is AAPL.
I would recommend two ways for you to grab the list of symbols. One is you can utilize the Finviz platform. This is the platform I walked you through on how to find comparable company symbols in this article. You can immediately get a list of potential companies by filtering the criteria. For the Finviz bot, I would specifically walk you through how to create using python in the other article.
Stock Valuation Using Comparable Company Analysis(CCA), Finviz, FMP
The other way is you can just google it or search for them in yahoo finance. Normally it would come up in SERP with the most relevant and popular symbols in the industry and similar product categories. For example, here are the best smart home listed companies in the public market.
Revenue CAGR using Easy2Digital API for the private eCommerce business valuation
FMP API is very powerful which is not only suitable for stock valuation and CCA. It can also be applied to private equity investment.
FMP company financial income statement provides the fiscal year revenue number over the past 5 years. The data is from the SEC, which is reliable to use as an anchor.
For the CAGR calculation, you can use the Google Sheet function – power, to calculate. Take the smart home for example. FMP API can give you the past 5 years of sales of the listed company. So you can take the 1st year and the 5th year sale number to calculate the CAGR.
For getting a more convincing revenue CAGR, you can select all similar listed companies and use the media CAGR. That in a way represents this industry in the past 5 years.
For the potential private company in the comparable industry, you of course can easily have the product average order value and monthly traffic online. So you can calculate the 1st year GMV. Plus the industrial revenue CAGR, you can also forecast the 2nd, 3rd, 4th, and 5th year’s GMV.
Full Python Script of CCA Bot
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FAQ:
Q1: What is Comparable Company Analysis?
A: Comparable Company Analysis is a method used to evaluate the value of a company by comparing it to similar companies in the same industry.
Q2: Why is Comparable Company Analysis important?
A: Comparable Company Analysis helps investors and analysts determine the fair value of a company and make informed investment decisions.
Q3: How does Comparable Company Analysis work?
A: Comparable Company Analysis involves analyzing financial ratios, valuation multiples, and other performance metrics of similar companies to determine the value of the target company.
Q4: What are the key factors considered in Comparable Company Analysis?
A: Key factors considered in Comparable Company Analysis include revenue, profit margins, growth rates, industry trends, and market conditions.
Q5: What are the limitations of Comparable Company Analysis?
A: Limitations of Comparable Company Analysis include differences in company size, geographic location, business model, and financial reporting practices.
Q6: Can Comparable Company Analysis be used for any industry?
A: Yes, Comparable Company Analysis can be used for any industry as long as there are comparable companies available for comparison.
Q7: How accurate is Comparable Company Analysis?
A: The accuracy of Comparable Company Analysis depends on the quality and relevance of comparable companies selected, as well as the accuracy of the financial data used for analysis.
Q8: What are some alternative valuation methods to Comparable Company Analysis?
A: Some alternative valuation methods to Comparable Company Analysis include Discounted Cash Flow (DCF) analysis, Asset-based valuation, and Market-based valuation.
Q9: Is Comparable Company Analysis suitable for startups or early-stage companies?
A: Comparable Company Analysis may not be suitable for startups or early-stage companies as there may be limited comparable companies available for comparison.
Q10: How can I perform a Comparable Company Analysis?
A: To perform a Comparable Company Analysis, you need to identify comparable companies, collect their financial data, calculate relevant ratios and multiples, and compare them to the target company.
