First Principles Financial Analysis Plus
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About this skill
Problem: Avoid Metric Lists Without Business Logic
Financial analysis of listed companies often fails in three ways: it lists revenue, ROE, and gross margin without explaining inflection points; it treats market narratives as verified facts; and it scatters risk signals across footnotes, quarterly trends, and peer comparisons. This skill turns financial analysis into an executable workflow, extracting traceable signals from annual and quarterly reports, broker research, and industry data.
How It Works: Six-Dimension Framework and Deep Teardown
The skill follows a structured pipeline:
- Scope definition: confirm the company, reporting period, focus areas, and comparison baseline to avoid vague analysis.
- Data collection: prioritize primary filings, then add broker notes and industry comparisons; emphasize non-GAAP attributable profit, operating cash flow, and net cash ratio.
- Six dimensions: growth, earnings quality, cash flow, asset quality, capital returns, and valuation.
- Deep decomposition: break down business segments, review the last 4 to 8 quarters, and compare peers when data is sufficient.
- Risk and opportunity checks: monitor repeated gross-margin decline, abnormal receivable growth, inventory buildups, weak operating cash flow, and low non-GAAP share.
- First-principles deep dive: when asked for underlying logic, separate narrative from facts, reduce to basic facts, split floor value and option value, and identify key tracking signals.
- Review and iteration: after each analysis, evaluate the result and the skill execution, then promote recurring issues into framework improvements.
Boundaries and Caveats
Best for listed-company earnings analysis, segment comparison, risk screening, and research notes. It does not provide real-time market data, compliance-ready investment advice, or audit conclusions. If key disclosures are missing, the output should be marked as an initial signal rather than a definitive judgment. For cyclical companies, undisclosed segment data, or capacity-driven businesses, verify utilization rates, pricing, inventory, and demand assumptions separately.
Use Cases
- Read annual and quarterly reports, organize core metrics into six dimensions, and assess earnings quality.
- Compare peer Q1 reports by business segment to separate revenue, gross margin, and valuation differences.
- When gross margin declines and receivables or inventory grow abnormally, identify risk signals and verification conditions.
- For deep single-company analysis, decompose basic facts and valuation support conditions using first principles.
Best For
- Buy-side researchers tracking earnings quality and cash flow who need conclusions tied to verifiable conditions.
- Industry analysts monitoring competitive positioning who need peer metric and valuation comparisons.
- Fundamental investors learning analysis who need to move beyond metric lists to business logic.
- Research assistants compiling investment notes who need structured, reviewable report output.
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