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When investing in the US stock market, it is important to pay attention to the financial reports of listed companies.

Financial reports mainly include income statements, balance sheets, and cash flow statements. They respectively reflect a company's profitability, asset quality, and cash flow situation. When investors want to delve into the 'heart' of a company, they need to use financial reports to gain insights into the company's intrinsic value.

So many successful investors emphasize the importance of reading financial reports. For example, the stock god Buffett once said, 'I just like to look at financial statements.' This is also one of Buffett's important methods for selecting stocks.

First, US stock financial reports help investors understand the financial health of companies, including key indicators such as revenue, profit, assets, and liabilities. Second, US stock financial reports are important tools for evaluating and comparing the performance of listed companies and can also serve as the basis for future predictions.

Below, the editor will briefly explain for you:

Through financial statements, you can understand the basic information of the company, such as its products, the types of customers it faces, and the channels it uses to interact with customers. In simple terms, it's about what the company sells, to whom, and how. These are the fundamentals of researching a company's business model.

Many well-known companies, such as Apple, Amazon, Google, and Coca-Cola, are listed in the United States. By examining the financial statements of these companies over the years, you can gain insights into their past development. If you want to judge the future development of a company, financial statement analysis is also crucial. In addition to the already outstanding listed companies, if you want to discover more potential US stocks, you need to delve into the financial statements of more companies.

In the history of the United States, there have been many companies that have committed financial fraud, causing significant losses to some US stock investors. We may be able to find traces of financial fraud in the company's financial statements. In addition, many companies with a bleak future have subpar financial data, and investing in these companies is likely to result in losses. We can use financial analysis to avoid them.

As mentioned earlier, financial reports mainly include income statements, balance sheets, and cash flow statements. They reflect a company's profitability, asset quality, and cash flow situation. Now let me do a simple analysis based on these three points:

It records how much revenue the company had, the situation of various costs and expenses, and ultimately, the net income or net loss. Based on this, we can analyze the company's profit margin, study the company's revenue and profit growth, and analyze the changing trend of profitability.

It records the assets and liabilities of the company at the end of a financial reporting period, the composition of the assets, and the amount of liabilities. After deducting liabilities from assets, it shows the net assets left to shareholders. By analyzing the balance sheet, I can analyze the company's asset indicators, the liquidity of various assets, and the company's debt repayment ability. In combination with the income statement, we can further analyze the company's operating capability and the level of return on investment created for shareholders.

Record how much money the company receives and spends during a financial reporting period when producing or operating, how much money is spent on investment projects and how much is recovered, how much money is borrowed in financing activities, and how much money is distributed to shareholders or returned to banks. Through the cash flow statement, we can evaluate the company's "blood-making" ability in operation activities, the scale of money burning in investment activities, and the dependence on external sources in fundraising activities.

It is important to note that the three major financial statements are not independent and are closely related to each other. We need to conduct a comprehensive analysis of these statements to evaluate the company's current financial condition and future development prospects. Below, we will take Apple Inc. (AAPL) as an example and present the information in a table, along with an analysis of key items (no separate interpretation is needed for unfilled items).

1. Income Statement, also known as Profit and Loss Statement

2. Balance Sheet

3. Cash Flow Statement

In summary:

The core purpose of interpreting financial statements is to identify companies with excellent performance and wait for reasonable prices to make purchases. For ordinary investors, these companies and the timing of their purchases are crucial for stable profits in the stock market. However, financial statements alone cannot help investors determine whether they can profit from unstable-profit companies.

Therefore, when we review the financial statements of specific companies, we can use their data to fill in these tables and analyze them one by one to form our own insights and evaluations of the company. We recommend that you select several companies of interest for practical exercises.

In financial statement analysis, absolute values are usually not the most important indicators. By contrast, ratios, growth rates, and relative values compared to other companies in the industry are more crucial. In addition to focusing on high-quality profit margins, we also value the sustainability of profits, growth potential, debt levels, and asset utilization efficiency, which are all key points we need to pay attention to.

The second quarter of 2024 earnings season in the US stock market is coming to a close, and the results are impressive. According to FactSet, the average profit growth of S&P 500 index companies this quarter is about 11%, reaching the highest level since the fourth quarter of 2021 (31.4%). It is also worth noting that 79% of S&P 500 index companies exceeded earnings expectations, with an average surprise of 3.5%. This is especially true in the technology and utilities industries. Despite pressure on certain industries such as materials and industrials, the overall market growth momentum remains robust. For investors, paying attention to the potential opportunities in these growth-driving industries may be key to future investment strategies.

To summarize, in investing in US stocks, financial statement analysis is a critical component that can help you understand listed companies, discover investment opportunities, and avoid speculative pitfalls. By comprehensively analyzing the income statement, balance sheet, and cash flow statement, we can make better investment decisions.