In this digital world, all finance transactions happen via digital medium, so an electronic tear sheets provides a single paper summary of the firm with information such as the 52-week high and low, market capitalization, market price, enterprise value, revenue, EBITDA, valuation, analyst recommendation, workforce size, share price movement, etc.
It’s also known as “Fact Sheets” and helps an investor understand the financials and prevailing valuations of any company. The term tear sheet is derived from an old practice when stockbrokers used to tear and give a sheet to the investor as a stock suggestion.
Contents of a tear sheet
1. Basic Financial Profile:
The basic idea is to get a good understanding of the valuation of the company and the range in which the stock price trades and the very first section of the sheet gives general information about the company’s stock, such as the last closing price, 52-week low and high, enterprise value, market capitalization, total shares outstanding, etc.
2. Expert Recommendation:
It shows the number of equity research analysts who are tracking the stock and their expectations for its performance. The experts do an in-depth evaluation of the company, including its valuation, to come out with an equity research report and comment on whether it’s time to sell or buy.
3. Valuation Ratios:
It is something that measures the key ratios for comparison purposes. It gives ratios like P/E, EV/Revenue, and EV/EBITDA based on the last year, the current year, and an estimation for the next year.
4. Estimates:
It shows the highest and lowest estimates as per analyst research reports, and this section gives the analysts’ mean estimates with respect to sales, EBITDA, and EPS.
5. Employee Tally:
It contains information like the total number of employees and revenue per employee. Revenue per employee will generally be higher in production companies compared to service industries as they depend more on workforce capital.
6. Stock Performance:
It shows the return made by the stock over 3-month, 6-month, and 12-month periods.
7. Profitability:
There are various measures of profitability (net income) that are important to various industries. A complete snapshot of the same is given for smart analysis. The kind of return generated on investments and equity is also given with a 5-year average to provide insights on past performance.
8. Sales by Region:
This shows the geographical mix, i.e., in what region the company is getting what percentage of total sales.
9. Price by Chart:
The last chart shows stock price movement over a year with the volumes of trade and the 50-day and 200-day moving averages.
Conclusion
It gives an overview of all the components of financial statements. It presents the income statement, balance sheet, and cash flow statement. The balance sheet includes details about long-term assets, cash, total assets, long-term debt, current liabilities, and shareholders’ equity. It gives the overall numbers that are relevant for a quick analysis, such as sales, gross profit, EBITDA, and net income. It also contains a distribution of cash flow from investing, operating, and financing activities, which is crucial to understanding the organization’s cash flow.