How to Analyse Stocks in Excel? Follow These Steps

If you are new to the world of stock investing , it can take some time to develop your stock analysis skills. Professional investors use a host of calculations, strategies, and tools to analyse stocks before taking a position.
While you can learn more about advanced methods to analyse stocks with time, you can do basic stock analysis with Microsoft Excel in the initial days.Here is how it is done-

The entire process is made up of 4 different steps. Take a look-

1. Source Company Data

The first thing you will need is a reliable data source to find detailed information about company financials. You can visit the companies' official website or use 3rd party online platforms to access the reports.
You will need reports like balance sheet, quarterly reports, cash flow report, and P/L report of at least 5-10 years.

2. Manually Enter Data in Excel

Once you have access to the required reports, you can then copy and paste the same into a spreadsheet. If you are analysing multiple companies, ensure that you use a different spreadsheet for each.Cross-check all the data before moving to the next step.

3. Analyse Financial Ratios

Once you have the spreadsheet ready, the next step is to analyse the most common financial ratios based on the company financials. Some of the most important ratios are the Current Ratio, Cash Ratio, Debt-to-Networth Ratio, Debt-to-Equity Ratio, Operating Efficiency, and Operating Profitability.You can first try to learn more about these ratios to improve the accuracy of your analysis. Once you’ve understood the ratios, you can easily use formulas in Excel for their analysis.

4. Implement Mathematical Models

Another excellent solution to how to analyse stocks in Excel is using popular mathematical models. Some of the most common of them are Absolute PE (Price-to-Earning), DCF (Discounted Cash Flow), NCAVPS (Net Current Asset Value Per Share), and RIM (Residual Income Model).Like the ratios above, it’d help if you first thoroughly understand the meaning of these models.

As you are just starting to learn about stock analysis , this Excel method is one of the easiest ways to begin. You can use this information to create a template that you can repeatedly use to analyse different companies and stocks.With time as you gain more knowledge and experience, you can then move to more complex stock analysis strategies.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.