Wednesday, May 27, 2020

We interviewed Tom Philips, Adjunct Professor, Department of Finance and Risk Engineering, NYU's Tandon School of Engineering. In addition to teaching, Tom is a Senior Investment Professor who was previously Global Head of Front Office Risk, BNP Paribas; Chief Investment Officer, Paradigm Asset Management; Managing Director, RogersCasey; Investment Research IBM

Here’s his take on using Calcbench for financial analysis.

How did you learn about Calcbench?

I teach a course at NYU’s Tandon School of Engineering on valuation theory. I needed a source of data for students. I was going to the SEC’s website to get the information. I thought there was a better way to pull the data. In the course of a conversation with Dan Gode, I learned about Calcbench.

How do your students use Calcbench?

The historical data is important for valuations. With Calcbench, students are able to download financial statements over time. They can look at a company’s history going back five, even ten years ago. For the class I teach, students need to value firms. To do that they need to understand:

  • What projections a company has made?
  • How has the company performed over the years?
  • Have there been any challenging years for the company? What has triggered those challenges? And, how did the company recover?
  • Which segments seem to be growing?
  • Which segments seem to be shrinking?

The students are asked to look through the footnotes and study the Management Discussion & Analysis and see if there’s anything noteworthy in their valuation assessment. With Calcbench, students get information from financial statements that would ordinarily take a long time to pull from the SEC’s website. Using Calcbench makes the students more productive.

Do you have any interesting examples of companies that were over/ under valued that you study?

There are many examples of valuations that don’t match the market price. One example that was a great learning lesson is Asian Paints. It was enormously overvalued. With Calcbench, we have a lot of fun evaluating Tesla.

What are the challenges of using Calcbench?

Calcbench is powered by XBRL [Extensible Business Reporting Language, the global standard for exchanging business information]. Over time the quality of XBRL has improved dramatically but there have been issues around the data being tagged correctly to get a uniform set of financials. I have always been of the belief that XBRL should be audited the way financial statements are audited. It’s important that electronic representations are an honest representation of the paper representation. I would also like to see broader coverage. It would be great to be able to access the full set of global companies and smaller cap companies. This will come over time.

What do you like most about Calcbench?

There are a few things that I find most helpful about Calcbench. The first is being able to track data over date ranges. I like that I can pull data for a specific company, over time, in a consistent format. I also find the restatement feature very useful. It’s an unusual feature but great to compare as-originally reported and restated financials with just a click on a button. There are many reasons why numbers may change: from a change in an accounting treatment, to the SEC “cracking the whip,” to a company thinking it’s in their advantage to restate a number. The challenge is that some portion of the financials may be restated but the restatement is not always adjusted throughout so you have to be careful. But it’s helpful to understand why a company might restate. I also really like the disclosure segments. I like to click on the various footnotes. The hyperlinks are terrific. You can go to an Income statement, for example, click on a footnote and quickly explore. Calcbench doesn’t just give you the ability to go deeper, it encourages you to go deeper. Calcbench encourages you to explore. Lastly, the massive speed up allows for sophisticated in-class discussions that can be backed up (or debunked!) very quickly by analyzing data downloaded from Calcbench.

What other uses for Calcbench do you recommend?

Calcbench is great for understanding corporate finance. If you are pulling data from the SEC’s Edgar database, Calcbench is orders of magnitude faster. You just download the report into Excel and extract information. It enables you to reduce data pulls from hours to seconds, at worst, minutes.

Do you use Calcbench in the classroom or remotely or both?

I teach with Calcbench in the classroom, but students use Calcbench remotely for homework. In class, I like to look at examples on the screen. For the examples that we discuss in class, I have students download the companies financial statements into Excel and do the hard work on their own.

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