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ValuTool 2.0 Instructions Out Of The Box DOWNLOAD & OPEN VALUTOOL To begin using ValuTool, you will need two things. First, you will need Excel 5.0 or greater (which you should already have). Second, you need the file attached to this email. To download the file, AOL members need to press the "Download Now" button at the bottom of the screen (or next to the Subject line on Macintosh versions of AOL). When you click the "Download Now" button, the computer will display a box with file directories in it. This is where it will download the file. Pay attention to where the file will download so you can find it to view it. (The file will probably download into your AOL\Download directory). Those of you who are not on AOL need to follow your own email service's directions regarding e-mail attachments. Some service providers have an icon representing the file at the end of the e-mail message. Some others, such as Juno, do not allow e-mail attachments at all. If you have any questions about this, contact your service provider's technical support. After you've downloaded the file, open Excel. Depending on how much memory your system has, you may need to close down your AOL first. The program should open up and go into action. After successfully opening Excel, click the word "File" at the top left of the screen and open the ValuTool file you just downloaded. Alternatively, if you're using a newer computer, you should be able to double-click on the file attached to this e-mail to open it automatically. AOL members should remember, that file is most likely in your AOL\Download directory, so look for it there. NETSCAPE MAIL USERS: Please use the following instructions to download ValuTool. 1) Right-click on the file icon, which should bring up a list of options. NEXT... Now that ValuTool has been downloaded, there are a couple of introductory setup matters that you should deal with before beginning to use it. Most importantly, please make a backup of the program. A lot can happen to a program that is in use frequently, and in order for you to be able to get back to the original program, you should store a backup somewhere away from your hard drive. We further recommend that you make frequent backups of your ValuTool in case something happens to either the software or your hard drive. In order to back up ValuTool, go to the File>>Save As... and give it a unique name. You will now have multiple copies of ValuTool, useful in case one is damaged. NAVIGATION ValuTool is divided into three separate areas, called "Pages." The first page is the Raw Information Page. It is here that you will enter all of the raw data about the company, the stock, the financial information, and all the rest of the relevant past data. It is recommended that you fill out this page as completely as possible before moving to the second and third, since much of the information found throughout the rest of the ValuTool depends on the information on the Raw Information Page. The second page is the Growth & Estimates Page. Here, ValuTool will present you with a number of historical growth rates, as well as with an indicator of past earnings numbers for your company. You will enter your earnings estimates here, which will be used in several of the valuations. The final page is the Valuations Page. Full of Valuations, Ratios and Potential Price Targets. Use these as a helpful step in determining what you think the true value of your company should be. To navigate among the pages, use the Excel Tabs at the bottom of each of the screen.
The key to getting good valuations out of ValuTool is to put good numbers into it. When you choose "New Stock", ValuTool will present you a screen full of blanks for you to fill in. These are all "raw data" numbers, available from Morningstar, Edgar, S&P and any number of other sources. Some suggestions for locating the data are found within ValuTool. Most of it can be found at quotes.fool.com. Try to get the best information you can find, since these raw numbers will be the basis for all of the valuation computations that ValuTool will take you through. The more accurate you are here, the better picture you will be able to develop later. COMPUTED VALUES Some of the information on the Data Entry Screen is computed (as opposed to entered). ValuTool will not let you change these computed spaces directly, so the only way to affect them is to change the values that go into the computations. For example, the Market Cap is computed by taking the current price of a stock and multiplying it by the number of shares outstanding. ValuTool will not let you directly change the Market Cap number, but that number will be changed as you change the number of shares and the price of the stock. COMPANY INFORMATION While it makes no difference in what order you enter all of the data into ValuTool, there is a logical progression which makes sense. The first step, then, should be to enter in all of the general company information. This includes information about the company name, ticker symbol, phone number, and the date that you're entering the information. The date you use should be the date you enter the information, not the date on any of the reports. By entering the current date, you'll be able to know at a glance later on whether or not the information needs to be updated. GENERAL STOCK INFORMATION The next step is to enter all of your General Stock information. This information is easily acquired from any number of places and includes the number of shares outstanding, the current price for the stock, the dividend and the book value. As with all data entry in ValuTool, you should not use dollar signs, fractions or commas, since it is easier for ValuTool to misinterpret data that is entered that way. If the share price is $27 5/8, you should simply enter 27.625. (Determine the decimal equivalent by dividing the fraction and then adding the whole number... so 5/8 = .625, .625 + 27 = 27.625) EARNINGS & REVENUE INFORMATION Moving on, you should now enter all of your Earnings & Revenue information. This information can be found in various places. ValuTool is looking for earnings by quarter for the last 8 quarters, earnings by year for the past 4 years, and revenues by year for the last 4 years. You should also enter information about profit margins for the last 4 years. Enter the number as a decimal (the percent divided by 100). For example, if the company had 14% profit margins, you would enter .14. The earnings and revenue section is crucial for most of the backward looking valuations, so try to be as careful as possible in data entry. Remember, do not enter dollar signs, fractions, percent signs or commas, as they might throw off your ValuTool Calculations. BALANCE SHEET / INCOME STATEMENT The final raw data entry necessary to fill in your ValuTool Data page will be all of the Balance Sheet information. This will require you to tell ValuTool about cash flow, debt and assets. Of all of the raw data required, this is the information that will take the most thought on your part. What a company considers assets, you may not choose to take into account as assets. What the company considers long term debt, you might consider short term, and vice versa. Toward this end, I cannot offer a stronger recommendation than to spend time in the Reading Financial Statements Folder. The Fools there have done a wonderful job of explaining some very helpful ways of understanding why companies report what they do in the way that they do, and how you can best make sense of a lot of numbers to come up with real numbers which will lead to real valuations. You might also want to spend some time in the collection of articles called A Journey Through The Balance Sheets, or in the Fool's School, reading about How to Value A Stock. As always with ValuTool, avoid dollar signs, commas and fractions. EARNINGS ESTIMATES The second page of the ValuTool is the Estimate page. It is here that you will offer your best assessment about the future of the company you are evaluating. The key to forward looking valuations is to come up with strong, accurate estimates of how much a company is going to earn per share in the future. Companies like First Call and I/B/E/S provide information about what the analysts are saying they believe a company will earn. Your broker also might have specific information offered by your brokerage house that their analysts have compiled. The company itself will often provide you with statements or reports from analysts about the company if you call their investor relations department. In the end, how much a company earns per share in the next few years will most likely correlate strongly with how the stock does, so your estimates are vital to the valuation of a stock. ALL ABOUT GROWTH While past rates of growth are not a sure indicator of the future growth of a company, they are worth taking into consideration. Therefore, ValuTool offers you a number of ways of looking at the historical growth of your company. The different growth rates will become more or less important based on the specifics of the company, and how well you believe their past may translate into their future. For example, if your company had an incredible quarter, but it isn't likely to happen again, then taking Q over Q growth rates for the last two quarters would unfairly skew your view of the companies prospects. These growth rates are meant to help you to think through the future estimates, but it is the estimates that are important for the next section, which deals with the valuations themselves. FLAGS ValuTool allows you to set two different "Flags". These are indicators that you would like to track for. For example, you might tell ValuTool that you would like to know when the PEG drops below .75. By using these flags, along with the quote update, you can keep on top of what's happening with the stocks you're following.
If you get your quotes from quote.fool.com, from Yahoo or from AOL's Portfolios, you can use that information to update your ValuTool portfolio. This will affect the ratios and the flags that you have stored, and may be done as often as you'd like. On AOL, you simply store a portfolio at keyword: Portfolios. Bring up the Portfolio and hit "Print/Save" and save that file as text. This is the file which ValuTool will prompt you for when you ask it to update your quotes. From quote.fool.com or Yahoo, hit the "Download As Spreadsheet" button when you receive quotes. That is the file which ValuTool will prompt you for when you ask it to update your quotes. MORE HELP If you find that you need more assistance, feel free to visit our online product tech support at http://www.fool.com/ValuTool.htm or at AOL Keyword: FoolTech. Alternatively, don't hesitate to drop a note to our technical support Fools at [email protected].
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