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4. Analyzing Company Fundamentals > Compare Year-to-Year Results

Compare Year-to-Year Results

Buy-and-hold investing doesn’t mean buy-and-forget. Compare a company’s performance to the same period a year ago to look for signs of trouble with its fundamentals.

For long-term investors, comparing shorter-term financial results can raise red flags about a company’s current condition. By comparing recent annual or quarterly results to the same period a year ago, you might receive early warning of a problem that could turn into a full-blown disaster over time. There is a wide range of figures you should evaluate on a company’s income statement, balance sheet, and cash flow statement.

The formula for calculating percentage change is shown in Example 4-49.

Example 4-49. Formula for percentage change

Percentage change = ((Ending Value / Initial Value) - 1) * 100

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