There are many steps in calculating the fair value of a company.
However, before we even do that, it is imperative to know how a company
earns its profit. Does it do that by selling to consumers? licensing
its technology to other companies? or extracting natural resources from
the ground?
The sensible way to do it is by reading the company's annual report.
What is an annual report? Annual report is yearly publication by public
companies to better inform investor about the company's line of
business. Annual report gives investors a glance of the company's line
of business, financial health as well as management's strategies for
doing business.
Let's look at CNET Networks Inc. The company trades in the NASDAQ
market with symbol: CNET. What does CNET do? I know CNET owns cnet.com.
But do you know that it also owns download.com, MP3.com, ZDnet.com and
News.com ? How do I know that? Yep, you guess it. CNET's Annual Report
will gives you all that.
From CNET's annual report, we can do a little digging for CNET's
internet traffic. As of August 27th 2005, these websites of CNET
attracts 3 % of all internet traffic. Pretty impressive, considering
that Google holds 23% of all internet traffic. On April 2005, Google
had 78.6 million unique visitors. By comparing this metric, we might
have an idea CNET's revenue potential for the month of August. I will
not go into that but this shows how useful reading CNET's annual report
is. Reading an annual report serves as the first step towards investing
in a particular company.
How do we obtain annual report? There are several sources for this.
First is the companies own website. You are interested in knowing more
about CNET Networks? You can get the annual report by going to
http://www.cnet.com and go to its shareholder relation. After several
clicks, you can then download the annual report.
Or ... you can go to some websites that offer complete annual report
for a number of different companies in alphabetical order. Our website
is one of them. Admittedly, while having hundreds of annual reports in
one place is convenient, it is not as thorough as what the company's
own website has to say.
