It can be easier to judge how good or bad something is when you have something to compare it with.
With these automated analyses, you can clearly see both the current situation and the future outlook for a specific company, assessed against other similar businesses. These analyses are for you if you want an overview of the competitive landscape, are planning to invest, or simply need particularly good insight into a company and the market it operates in.
In a due diligence review of a company, there is a fair amount of internal data that has to be gathered and assessed before you can take a view on whether the business really has the value being claimed. Business models, product maturity, production costs, knowledge and structural capital are examples of what can be decisive when you evaluate a possible customer or an investment target. That data usually requires individual interpretation.
For external and public data, an objective assessment is often possible. Automating this type of analysis can save you time on gathering information, aggregating data and visualising it.
Perhaps the most common and most straightforward analysis for risk assessment is a credit check. Several recognised models exist, but it is generally both an advantage and a necessity to bring in other parameters as well. With these standardised analyses, you can easily compare a company with others and get a more nuanced picture of what level of key figures is acceptable.
Facts about the analysis:
• Compares one company against an entire industry and 10 similar companies
• Built from sources for financial and demographic variables
• Based on machine learning algorithms that predict future development
• Models from Corpia and data from Enin
Here we have looked at 3 different areas that we believe make an important and appropriate basis for comparison:
1.Industry dynamics
Trends and forecasts for an entire industry or grouping.
2.Peer group analysis
Comparison of a company against others with similar revenue and capital structure.
3.Behaviour analysis
Strengths and weaknesses in ownership structure and roles in a company, compared with others in the selected benchmark group.
Let us look at these more closely:
1.Industry dynamics
Trends and projections for the industry as a whole put the numbers in context and give you a solid basis for saying something about how a company is performing in the environment it operates in.
Competitive landscape and consolidation
Here we show the competitive landscape, revenue development and the number of companies in a selected industry.
The charts give an impression of the competitive situation in the industry. Do a few players dominate, or is the industry fragmented, with many smaller businesses? That can give us indications of whether consolidation and mergers are a natural next step.
Investment trends and bankruptcy density
This analysis shows investment trends, both investment in the industry and CapEx (investment in assets for growth). It tells us something about whether there are opportunities and optimism in this market.
The second chart shows the density of bankruptcies, and so tells us something about the risk across the industry as a whole. Our machine learning model also gives us insight into the probability of bankruptcy over the next 12 to 24 months.
Geographic risk and revenue outlook
Does a company's risk profile depend on geography? This can give us an indication of whether location is worth taking into account. The heat map is based on the probability of bankruptcy over the next 12 months, along with a range of micro and macro demographic variables for the area in question.
The analysis at the bottom of the image shows revenue and development in the industry over several years, and how the results for our selected company (target) compare. We also get a projection of likely results going forward.
Geographic growth
Just as we showed a heat map for risk earlier, this one shows where growth in the industry in question is most likely. The time horizon for this forecast is the next 12 months. The data is a combination of actual key figures and variables from SSB.
2.Peer group analysis
Comparison against other companies in your industry whose revenue and capital structure are fairly close to your own.
Here our algorithms pick out a group of 10 companies.
Profit and loss
The first charts show more about the growth and opportunities of the business we are examining, compared with a group of 10 other companies.
Facts about ROE and ROA:
ROE= Net Income / Shareholders’ Equity
ROE (Return On Equity) indicates the extent to which a company increases its profit relative to how much capital is used along the way. A high ROE is therefore a good sign, while a falling ROE can indicate less efficient use of capital.
ROA = Net Profit / Total Assets x100
ROA (Return on assets) is a measure of how efficiently a company uses its assets to generate profit over time. Comparing with other companies in the same group is essential here for saying whether the level is satisfactory.
An ROA above 5% is often regarded as satisfactory, while 20% or better is a sign of very good financial health. The higher the ROA, the better the company can be said to be at generating profit.
Source: https://www.forbes.com/advisor/investing/roa-return-on-assets/
Working capital
The chart shows working capital, where one company is compared with those in the reference group of 10 others.
Facts about working capital:
Working capital is a measure that says something about the liquidity a company has available once all recorded short-term liabilities have been settled and all recorded short-term receivables have been collected (current assets). The key figure therefore shows how much capital is available in the short term (the next 12 months) and can be used for growth in the form of purchases and investments, or for maintenance, finance costs and instalments to banks and the like.
Source: https://blogg.paretobank.no/hva-er-arbeidskapital-og-hvorfor-er-det-viktig
3.Behaviour analysis
Strengths and weaknesses in ownership structure and roles can be decisive for whether you, as an investor for example, should spend time going into a company. The number of employees and the mix of expertise can also be indications of efficiency and degree of digitalisation when seen against other key figures.
Employees and board composition
The first chart shows the development in the number of employees and sales revenue per employee compared with the 10 companies in the reference group. Then come the average age and the number of board members.
Board and shareholders
How many other boards do the board members sit on, and have they been involved in bankruptcies before? That is shown here together with the largest shareholders.
The analyses can be integrated as a feature in a business system, so that you always have access to run new analyses. They are also available in the Enin web portal.
All the underlying data is available in Excel sheets and can be used for your own analyses. Would you like to pull out a report, or several?
