Company Stock Research: Using SEC Filings Is Not Just for Pros

The average investor can find a wealth of stock research information in SEC filings. Much of the information is in layman’s terms and easily understandable. This information is free and easily accessible. Anyone who has access to the Internet can get information from the U.S. Securities and Exchange Commission (SEC) website. This site has a database known as EDGAR. The SEC homepage has a link to Edgar as well as a tutorial. From the links on the site, you can view and download a number of various reports. However, the most helpful reports for the average investor are the 10-K, annual and quarterly reports.

The Annual Report and 10-K

The annual report and 10-K provide much of the information investors need to properly evaluate a company. Companies typically provide annual and quarterly reports to shareholders. There are also required filings for all publicly traded stocks. In addition to the annual reports, companies are required to file a report known as a 10-K.  The annual report and 10-K, which many companies combine, contain a lot of the same information, and they mirror the report provided to shareholders.

Most people are aware that these reports contain complete audited financial statements. However, many novice investors do not take the time to review them. Overlooking these statements can be a mistake. You do not need to be an expert at reading financial statements to learn some very valuable information about a company. For example, just a cursory look at the financial statements can tell you if a company is profitable. You can also see if the company is growing or declining in sales, profits or losses.

Management Discussion

Annual reports contain a management discussion of the company. It describes the company's history, operations, and products or services. This usually includes a summary of industry trends, significant company events and challenges the company is facing. This section also gives the management’s view of the future direction of the company, including the conditions or factors that could potentially prevent the company from realizing its objectives. These risk factors are generally listed and explained in detail. The management discussion will outline the company's strategy and plans to grow the company. It will also address the risks that have been identified. The information in the management discussion can give a potential investor a much better and clearer understanding of the company.

Executive Compensation, Legal Actions and Other Information

Executive compensation can indicate whether management is operating in the best interest of the stockholders. If excessive salaries and bonuses are being paid, they will be listed in these reports. Legal actions against a company can have a significant adverse impact. A large judgment can wipe out all profits or even force a company into bankruptcy. If the company is involved in any legal proceedings, related information will be included in this report.


The notes to the financial statement can provide revealing information about the company. Many significant events are often included. In the notes, you will find the answers to many of the questions you have about a company. For example, if there is significant loss or gain in sales, profit or losses, you will find information about that in the notes. The financial statements provide the numbers. The notes provide an explanation of the financial results. Sometimes, this information can greatly influence an investor’s decision.


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