When it comes to analyzing financial markets, the first thing that comes to many people's minds is graphs, ratios, balance sheet items, profit margins or price movements. All of these are important. But doing real analysis is not just looking at the numbers. To analyze is to try to understand the story behind those numbers.
A company's sales may have increased. At first glance, this seems like good news. But if profits are falling while sales are increasing, there is another story. The company may be growing but unable to control its costs. Another company's net profit may have increased. This seems positive at first glance. However, if this profit comes from a one-time asset sale rather than from core activities, the sustainability of this profitability should be questioned. Analysis is the ability to see this difference.
It's important to read the numbers; But it is more important to question the numbers. Financial literacy starts here. It's one thing to look at a chart and just say "profits increased"; “Why has profit increased? Is this increase sustainable? Does cash flow support this? How does debt affect this picture?” It's another thing to ask. Good analysis starts with a second look.
Therefore, one should not act hastily when evaluating a company, an asset or a market movement. The first number that appears is often not the whole truth. In the markets, what appears on the surface may not always be the same as what is deep down. This is what makes analysis valuable in terms of Enbilir's educational approach: The user tries to understand not only the result, but also the process that creates the result.
First Question When Starting Analysis: What Am I Looking At?
The first step in doing analysis is to correctly define what we are analyzing. Are we reviewing a company? Are we evaluating a share price? Are we trying to understand the direction of an industry? Are we interpreting the impact of a macroeconomic development on the market? Or are we evaluating the outcome of a decision we made in our virtual portfolio?
This distinction is important. Because not every analysis is done with the same tools. When analyzing a company, balance sheet, income statement, cash flow statement, debt, profitability, growth and sector position are important. When analyzing the market, interest rates, exchange rates, inflation, global risk appetite, commodity prices and news flow come to the fore. Price movement, trend, volume, support-resistance and indicators are used more in technical analysis. When performing portfolio analysis, distribution, risk level, cash share and decision discipline become important.
For example, if a user sees an asset rise in his virtual portfolio on Enbilir, the first question should not be: “Should I buy more?” The more accurate first question is: “Why has this rise occurred and what does it mean for my portfolio?” Even this small question change improves the quality of the analysis.
Likewise, if a company's net profit has increased, it is not enough to simply say "the company is doing well." It is necessary to ask: Have sales also increased? Has the gross profit margin been maintained? Has operating profit increased? Have financial expenses decreased? Did the profit come from a one-time income? Does cash flow support this profit?
Analysis is the work of setting the right questions before the answers.
Analysis Should Be Done in Three Layers
A sound financial analysis is generally done in three layers:
Basic structure of the company or entity
Financial statements and ratios
Market pricing and expectation
Looking at just one of these three layers may lead to incomplete evaluation.
A company's business model may be strong, but it may have high debt. Its financial statements may look good, but the share price may have overpriced that goodness. The technical outlook may be positive, but the company's fundamental performance may be weakening. Therefore, it is necessary to combine the layers in the analysis.
1. Basic Structure of the Company or Entity
When analyzing a company, it is necessary to start with this simple question: What does this company do and where does it make its money?
This question seems simple but is very important. Because sometimes investors focus on price movement and do not understand the company's business well enough. However, an analysis would be incomplete without understanding what the company sells, to whom it sells, what costs it operates at and what risks it is exposed to.
For example, the financial structure of a food retailer and a technology company is not the same. A retail company can operate with low profit margins but high sales volume. A technology company may have higher gross margins but a different expense structure due to R&D and growth investments. An industrial company may be more affected by exchange rates, energy costs and raw material prices. A bank is evaluated based on its interest margin, credit quality and non-performing loans.
Therefore, it is not correct to read every company with the same glasses. When making analysis, it is necessary to understand the sector logic.
For example, let's consider two companies:
Company A: Grocery store chain. Sales volume is very high, profit margin is low, cash conversion is fast.Company B: Software company. Sales volume is lower, gross margin is higher, growth investments are significant.
Directly comparing the net profit margin of these two companies can be misleading. Because business models are different. While the grocery store chain may be very successful with a 4% net profit margin, 4% may be low for the software company. The analysis should be done knowing this difference.
2. Financial Statements and Ratios
Once you understand the company's business, it's time for the financial statements. Here, the balance sheet, income statement and cash flow statement should be read together.
The balance sheet shows us the financial position of the company on a certain date. The company's assets, liabilities and equity are displayed here. The income statement shows the company's sales, costs and profits during a certain period. The cash flow statement helps us understand whether the company is actually generating cash.
A very common mistake is to only look at the income statement. However, net profit may seem high, but the company may not be able to generate cash. Sales may be increasing, but if receivables are also growing rapidly, a collection problem may occur. The company that declared a profit may have been surviving by borrowing in the same period. Therefore, financial statements should be read together.
Let's give an example.
Let's say a company's sales increased from 1 billion TL last year to 1.5 billion TL this year. At first glance, this means 50% growth and looks positive. But if the cost of sales increased much faster during the same period, the gross profit margin could decrease. If operating expenses have also increased, sales growth may not be reflected in profit.
In this case, the analysis should be done as follows:
"Sales have increased, which is positive. But has the cost of sales increased faster? Has the gross profit margin been maintained? Is the company becoming more efficient as it grows, or is its profitability decreasing as it grows?"
As can be seen, good analysis examines the relationship between numbers, not a single number.
Example 1: If Sales Increase but Profit Falls
Let's say a company's income statement is as follows:
Table: Pen | Last Year | This Year Net Sales | 1,000 | 1,500 Cost of Sales | 650 | 1,100 Gross Profit | 350 | 400 Operating Expenses | 180 | 270 Operating Profit | 170 | 130 Net Profit | 120 | 80
At first glance, an increase in sales from 1,000 to 1,500 seems very good. The company grew by 50%. However, the net profit decreased from 120 to 80. In this case, it is not enough to say “the company is growing”. The more correct interpretation is this:
"The company increased its sales, but this growth was not reflected in profitability. The cost of sales increased faster than sales. Gross profit margin decreased. Operating expenses also increased. Therefore, although the company made more sales, it made less net profit."
Here the analysis leads us to the following questions:
Is the company unable to reflect cost increases in its prices? Is it experiencing price pressure due to competition? Have raw material, energy or exchange rate costs increased? Are the expenses incurred for growth temporary or permanent? Can this falling profitability be corrected in the future?
That's the analysis. It's not just about seeing sales growth, it's about understanding the quality of growth.
Example 2: If Net Profit Is Increasing But Operating Profit Is Weak
Let another company's table be like this:
Table: Pen | Last Year | This Year Net Sales | 2,000 | 2,100 Operating Profit | 300 | 220 Financial Income | 20 | 250 Net Profit | 200 | 350
In this table, the net profit seems to have increased from 200 to 350. At first glance, the company may seem very successful. But operating profit decreased from 300 to 220. The increase in net profit was largely due to financial income.
In this case the comment should be:
"Net profit increased, but main operating profit decreased. The profit increase may have come from financial income, not from the company's core business. Therefore, it should be questioned whether the increase in net profit is sustainable."
The point to consider here is: Is the company's core business really strengthening? Or is it a periodic financial income that increases the net profit?
Good analysis does not view net profit as just a number. It looks at the source of net profit.
Example 3: There is Profit but No Cash
A company may be reporting profits. However, whether this profit turns into cash should be examined separately. Because the company may have made a sale but could not collect the money.
Let's consider an example:
Table: Pen | Amount Net Profit | 300 Increase in Trade Receivables | 500 Increase in Stocks | 250 Cash Flow from Operating Activities | -150
In this table, the company announced a net profit of 300 million TL, but the cash flow from operating activities is negative. This may be due to the increase in receivables and stocks. The company made a sale on paper, but has not yet been able to collect the money. Or he has too much money tied up in stocks.
In this case, the analysis should ask the following questions:
Is the company making sales but is the collection delayed? Is the quality of receivables deteriorating? Why are the stocks increasing? Does the company meet its cash needs with debt? Is this situation temporary or structural?
This example is very important. Because investors often look at net profit but neglect cash flow. However, companies make payments from cash, not profits. Salaries, debts, interest and investments are covered with cash. Therefore, it is vital that profits are converted into cash.
3. Market Pricing and Expectation
A company's financial statements may be good. But this does not necessarily mean that the share price is cheap. The market sometimes prices good companies with very high expectations. In such cases, even if the company is good, the price may be expensive. The opposite is also possible. The market may over-penalize some companies; The company's problems may be heavily reflected in the prices.
Therefore, the third layer in the analysis is pricing and expectation. The following questions should be asked here:
Has the good performance of the company already been reflected in the prices? What does the market expect for the next period? Will the company be able to meet these expectations? To what extent could the bad news have been reflected in the prices? Is the share price reasonable compared to the profit power of the company?
For example, let's consider two companies. Let the profits of both increase. But one's share price may have already priced in that growth. In the other, the market may still be cautious. That's why making a decision just by saying "profits are increasing" is insufficient.
At this point, valuation ratios such as price/earnings, market value/book value, firm value/EBITDA can also be used. However, the same principle still applies: Decisions cannot be made with a single ratio. Valuation ratios should be read together with the company's growth potential, risks, industry structure and profit quality.
One of the Biggest Mistakes in Analysis: Attributing Too Much Meaning to a Single Data
One of the common mistakes in the markets is to attach too much meaning to a single piece of data. For example, looking only at net profit growth, looking only at the debt ratio, looking only at the chart trend, or relying only on the AI signal is incomplete analysis.
A company's net profit may have increased but its cash flow may have deteriorated. Debt may be high, but that debt can be long-term and low-cost. The chart may be positive, but the company's underlying performance may be weakening. The AI signal may be strong, but the overall market sentiment may be deteriorating.
Therefore, a single strong data in the analysis should not immediately convince us. Likewise, a single negative data should not immediately alienate us. Financial analysis is a matter of putting the pieces together.
When evaluating a company, the following integrity should be sought:
Are sales growing? Is profitability maintained? Is cash flow healthy? Is debt manageable? Is the company's industry supportive? Does management inspire confidence? Is pricing reasonable? Are expectations realistic?
These questions together make sense.
Time Dimension in Analysis: Trend is Important, Not a Period
Looking at a company's single-period financial results can sometimes be misleading. Because companies may experience periodic effects. Exchange rate difference income may occur in one quarter, inventory profit may be recorded in another quarter, there may be temporary cost pressure in one period, and one-time income may be obtained in another period.
Therefore, trend is very important in analysis. It is necessary to see the last three years of the company, and if possible the last five years. Are sales increasing regularly? Are profit margins maintained? Is debt increasing over time? Are equities getting stronger? Is the cash flow stable?
For example, a company's net profit may have been very high this year. However, if the company has consistently made losses in previous years, the reason for this profit should be carefully examined. Likewise, profits may have fallen this year; But if the company is growing healthily in the long term and this decline is due to a temporary investment period, the picture may not be as negative as it seems.
Trend shows us the direction of the company. The only period is photography; The trend is movies. Good analysis looks at film, not just photography.
Analysis Is Incomplete Without Sector Comparison
When evaluating a company's ratios and financial results, it is necessary to compare it with the industry. Because every sector has its own dynamics.
For example, in a retail company, the net profit margin may be low. However, this structure can be successful if the stock turnover rate is high and sales volume is strong. Gross profit margins are expected to be high in a software company. In an industrial company, energy, raw material and exchange rate costs may be more decisive. In a bank, completely different ratios are used.
Therefore, before saying "this company's net profit margin is 6%, it is low", we should ask: What is the margin of companies in the same industry? Is the company above or below the industry average? Are margins improving or deteriorating over time?
For example, let's say there are three companies in the same industry:
Table: Company | Net Profit Margin | Debt / Equity | ROE Company A | 8% | 0.70 | 18% Company B | 6% | 1.80 | 25% Company C | 10% | 0.50 | 16%
Company B's ROE appears to be the highest. At first glance, it may seem like the best company. However, the debt/equity ratio is also quite high. In this case, some of the ROE may be due to high debt usage. Company C has a lower ROE, but a higher net profit margin and more reasonable debt. In this case, which one is healthier cannot be determined by a single ratio.
This is where analysis comes into play. It is necessary not only to choose the highest number, but to understand how the number is formed.
Qualitative Analysis: What Numbers Don't Say
Financial statements tell a lot, but not everything. A company's management quality, brand strength, competitive advantage, customer loyalty, technological transformation capacity, regulatory risk and corporate culture are also important. These do not always appear directly in the picture, but they affect the future of the company.
For example, two companies' financial ratios may be similar. However, if one has a strong brand, widespread distribution network and loyal customer base, it may be more durable in the long run. Even if another company looks good financially, if management is not transparent, changes strategy frequently, or has high exchange rate risk, caution should be exercised in the analysis.
The following questions are important in qualitative analysis:
Is the company's business understandable? Does the management inspire trust? Does the company have a competitive advantage? Is the sector growing or shrinking? Can the company adapt to technological change? Is foreign exchange, interest, energy or regulation risk high? Is the customer structure diversified or does it depend on a few large customers?
These questions complete the financial statements. Good analysis combines numerical data with qualitative observation.
Analysis Is Not Complete Without Considering the Macro Environment
The company may be good; However, the macroeconomic environment in which it operates may affect the company's performance. Interest rates, inflation, exchange rates, global demand, energy prices, commodity costs and consumer confidence can determine companies' results.
For example, a company with high indebtedness may face more financing expenses during a period when interest rates rise. A company that uses imported raw materials may be negatively affected by the exchange rate increase. A company that exports may be more resilient thanks to its foreign exchange earnings during a period of weak domestic demand. An energy-intensive industrial company may be affected by the increase in energy prices.
Therefore, the macro framework should also be considered when analyzing the company.
For example, there might be a situation like this:
The company's sales are good, its products are strong, and its market share is increasing. However, most of the company's debt is short-term and interest rates are rising. In this case, financing risk may increase even if the company looks good operationally.
Another example:
The company's sales in the domestic market are weakening, but export revenues are increasing. Exchange rate movements may support the company's revenues. In this case, looking only at domestic demand would be an incomplete analysis.
The macro environment does not affect every company in the same way. The important thing is to understand how sensitive the company is to which economic variable.
Technical Outlook and Fundamental Analysis Can Complement Each Other
Some users only look at fundamental analysis, some only look at technical analysis. However, the two answer different questions. Fundamental analysis “Is this company or asset valuable, healthy, strong?” approaches the question. Technical analysis is “How is the market currently pricing this asset, what is the trend, what is the buyer-seller balance?” looks at your questions.
A company may be fundamentally strong but have poor technical outlook in the short term. In this case, it may be necessary to be patient. An asset's technical outlook may be very strong, but if its fundamentals are weak, the sustainability of the move should be questioned.
AI Assistant and market signals in Enbilir can help at this point. But the same principle applies: The signal is not the decision. The signal is information that needs to be evaluated. The user must consider the technical outlook, fundamental data, macro environment and own portfolio risk together.
The Importance of Analyzing a Virtual Portfolio
Analysis is not only necessary for real investments. It is also very valuable to analyze the virtual portfolio. Because the purpose of the virtual portfolio is not only to make transactions, but to improve the quality of decisions.
When a user adds an asset to his virtual portfolio in Enbilir, he can ask himself the following questions:
Why did I choose this asset? Is this decision based on the technical outlook, fundamental expectation or macro environment? How much space did I include this asset in my portfolio? How much will my portfolio be affected if I am wrong? How will I evaluate this decision later?
These questions seem simple but are very instructive. Because over time, the user begins to look not only at the transaction result but also at the decision process.
For example, the user bought an asset and made a profit in the virtual portfolio. Here, instead of just saying "I won", one should ask:
Did this profit come from the analysis or the general rise of the market? Would I make this decision again under the same conditions? Did I adjust my risk correctly? Do I think my decision was good because I won?
Likewise, when you make a loss, it is not enough to just say "I was wrong." Maybe the process was correct, but the market changed direction with an unexpected development. Maybe the process was really poor. Making this distinction is the real educational value of the virtual portfolio.
Red Flags When Analyzing
Some signs warrant greater caution when examining a company or asset. We can call these red flags. They do not mean absolute negativity on their own, but they should definitely be questioned.
Some of these are:
Continuous decrease in profit margins while sales increase. Weakening of operating profit while net profit increases. Continuous negative operating cash flow despite the profit announcement. Rapid increase in debt. Financing expenses erode operating profit. Inventories grow faster than sales. Signs of deterioration in the collection of receivables. Weakening of equity capital. Inflation of profit with one-time income. The company constantly needs to increase paid capital or borrow money.
When these signs are seen, it is not right to immediately say "the company is bad". But it is necessary to say, "I should look more carefully here."
Positive Signs When Analyzing
There are also positive signs. These suggest that the company may have a healthier structure.
Stable growth of sales. Maintenance or improvement of gross profit margin. Increasing operating profit along with sales. Supporting net profit from main activities. Strong operating cash flow. Debt remaining at a manageable level. Comfortable interest coverage ratio. Strengthening of equity capital. The company has a competitive advantage in its sector. Management being transparent and consistent.
But the same principle applies here: Positive signs alone are not the decision. These are powerful data points for analysis.
A Practical Analysis Framework
When analyzing a company or asset it can be helpful to follow the following order:
1. Know the Company
What does the company do? Where does he get his income from? What are their products or services? Who are their customers? Is the sector growing?
2. Look at Sales
Are sales growing? Is this growth due to real volume growth or price increase? Is sales growth sustainable?
3. Examine Profitability
How do gross profit, operating profit and net profit go together? Are margins protected? Does profit come from core activities?
4. Read the Balance Sheet
What about the company's debt? Are short-term liabilities manageable? Is its equity capital strengthening? Is the stock and receivables structure healthy?
5. Look at Cash Flow
Can the company convert its profits into cash? Does the business generate cash from its activities? How does it finance its investments and debts?
6. Compare with Industry
Where does the company stand in its industry? Is it more profitable, more indebted, or growing faster than its competitors?
7. Consider Pricing
The company may be good but expensive. The company may appear weak, but its price may reflect that weakness. The relationship between expectations and price should be considered.
These seven steps help make analysis more orderly and disciplined.
At the end of the analysis, a better opinion is formed, not a definitive answer.
Analyzing does not mean knowing the future with certainty. This must be said very clearly. No analysis method, no ratio, no chart and no AI interpretation guarantees the future. Analysis does not completely eliminate uncertainty; It makes uncertainty more manageable.
A person who analyzes well can also be wrong. However, a person who does not analyze often cannot even understand why he is wrong. The analysis forms the justification for the decision. Even if it turns out to be wrong, it leaves a trail of thought that can be looked back on.
For this reason, analysis culture is very important at Enbilir. When the user makes a decision in their virtual portfolio, there must be a rationale behind this decision. That justification may or may not be true. But over time, the user has the opportunity to develop his own way of thinking.
In the markets, everyone wins from time to time, everyone loses from time to time. What makes the difference is how gains and losses are valued. The person who analyzes learns both when he wins and when he loses. Because its purpose is not only to look at the result, but to understand the process.
Conclusion: Good Analysis is the Discipline of Calm Thinking
Analyzing doesn't have to be complicated. Of course, financial statements, ratios, technical indicators and valuation methods should be learned. However, the basis of all of these is a simple idea: Trying to understand what is behind the visible number.
If the sales increased, why did it increase? If the profit increased, from which item did it increase? If the debt increased, why did it increase? If the cash flow is weak, what is the reason? If the price increased, did the expectation change or was it just excitement? If the AI signal is strong, what data supports this? If the portfolio made a profit, is this the result of a good decision or the effect of luck?
These questions are the foundation of good analysis.
This is exactly the approach that Enbilir wants to bring to the user. Not just looking at prices, but questioning the reason behind the prices. Not just looking at profit, but understanding the quality of profit. Not just seeing the signal, but evaluating the context of the signal. Not just being happy or sad with the outcome, but learning from the decision process.
Because financial literacy is learning to think correctly before knowing a lot. Good analysis is one of the most important tools of this thinking discipline.
Therefore, when we look at a chart, a graph or a market news, instead of making a decision immediately, we should take a step back and ask:
“What do I really see here, what do I assume, and what do I not know yet?”
Good analysis begins with this honest question.