As discussed in his best-seller, “One Up on Wall Street,” legendary investor Peter Lynch compared the company’s price line to its earnings line to determine if a company is undervalued. Buying growth stocks at deeply undervalued prices and selling them when the price rises sharply above the earnings line generally leads to good returns.
GuruFocus’ Interactive Chart feature allows you to construct charts including the famous Peter Lynch Chart. Additionally, you can construct an eclectic variety of charts, compare financial data between two or more companies and explore when a company stock presents a good investment. Figure 1 presents the Peter Lynch chart for Apple Inc. (AAPL, Financial), one of the most popular technology companies in the world.
Figure 1
A user-friendly interface
You can access our Interactive Charts in at least three ways, including:
- Typing in a company ticker symbol in the “Search: Enter Ticker, Guru, Company, etc.” box at the top of the GuruFocus page, and clicking “company stock name Interactive Chart” among the drop-down menu.
- Clicking on the “>> Interactive Charts” link on a company’s summary page in the upper-right corner of the Peter Lynch Chart section.
- Clicking on the “Interactive Chart” tab among the tabs located in the gray ribbon underneath the blue “Add to Portfolio” button and the “XLS Download” button.
Once you access the Interactive Charts interface, the chart automatically graphs the company’s historical stock price line for all years as shown in Figure 2. The position numbers on Figure 1 identify the locations of five basic features of the interface:
- This row of buttons allows you to change the chart’s timeframe to a predefined time period. You can choose from three months, six months, the year to date, one year, three years, five years, 10 years or all years. The chart will graph the active financial metrics for the recent time period specified.
- You can customize the chart’s time frame with these two boxes. For example, you can graph Apple’s stock price from January 2011 to January 2013 using this feature.
- This area, the core of the interactive chart, displays the active financial series in color-coded lines.
- These three buttons allow you to download the chart output to Excel, save the chart as an image or embed it to your article. We will discuss downloading to Excel in a future user manual.
- These four square-shaped buttons represent one of the Interactive Chart’s newly added features, the Drawing Toolbox. We will discuss this feature in a subsequent article.
Figure 2
General Interactive Chart features
Although the 15-year financials feature presents a full account of a company’s financials, the arrangement of the data can complicate analyses. The Interactive Chart facilitates the analysis process since the chart usually graphs the historical trend of at most four financial metrics at one time. While there is no limit on the number of lines that can be drawn on the chart, the optimal number of lines is about three to avoid confusion between the graphs.
GuruFocus conveniently organizes the available financial metrics into several tabs. For example, commonly used financial strength and profitability metrics populate the “Valuation and Quality” tab. Other tabs, including “Income Statement” and “Balance Sheet,” list appropriate financial metrics underneath the tab.
You can generate an eclectic variety of charts, from a simple chart comparing the Piotroski F-score of two companies to a chart that details when a company is undervalued based on its price-sales (P/S) ratio. Figure 3 displays the historical trend of F-scores for three common technology companies: Apple, Alphabet Inc. (GOOG, Financial) (GOOGL, Financial) and Microsoft Inc. (MSFT, Financial).
Figure 3
Based on Figure 3, we can observe the volatility of Apple and Microsoft’s Piotroski F-scores during the past 10 years. Additionally, the Washington-based software company’s F-scores generally declined, suggesting a weakening business operation. On the other hand, Google’s Piotroski scores have remained flat year over year since 2012.
While the three technology companies had predictable F-scores on an annual basis, the scores sharply fluctuated on a quarterly basis, as illustrated in Figure 4. Each company could have strong F-scores in one quarter and modest scores in the following quarter.
Figure 4
Up next
So far, we have only introduced the basic features of Interactive Charts. In subsequent articles, we will explore the predefined charts including the P/S valuation bands chart. This chart can identify when a company trades below its fair value based on historical P/S ratios. We will also determine which industries offer good investing opportunities based on P/S valuations.
You can view the user manual on interactive charts by clicking the “PDF Tutorial” button in the upper-right corner, between the “Reset All” and “Video” buttons.
Although free members have limited access to Interactive Charts, most of the features require premium membership. Subsequent articles will discuss these features, including customized series and downloading to Excel. If you are not a premium member, we invite you to a free seven-day trial.
Disclosure: The author has no position in the stocks mentioned in this article.
