Before you invest in a stock, it’s worth knowing which risks the company faces. These are known as Risk Factors, and companies are required to report them to the SEC in their quarterly and yearly reports. However, it’s difficult for investors to get value from these disclosures. They are long, tedious to read, and almost impossible to understand. That is, until today!
TipRanks has launched a new feature, enabling you to fully understand all the possible risks entailed in each investment. As always, TipRanks does the hard work, so you can enjoy conducting research with ease.
Our new feature gives you an easy-to-understand overview of the risks that companies report to the SEC. Here’s how it works. Scroll down for a full guide.
Where to Find the Risk Factors Tab
Insert the name or ticker of the stock you want to research in the TipRanks search bar. Then select “Risk Factors” on the menu.
The first thing you will see is an overview of risks from the company’s most recent report.
You can see the total number of risks reported and a breakdown according to category. TipRanks has identified 6 main risk categories:
- Finance & Corporate
- Legal & Regulatory
- Macro & Political
- Tech & Innovation
- Ability to Sell
Click on any of the categories to drill down further into this category. You will see 4 subcategories.
Then click on “Back to main categories” to return to the overview of risk distribution.
Main Risk Category
The main risk category shows the risk category a company is most exposed to, based on the company’s own reporting, in this case, Finance & Corporate.
Number of Disclosed Risks
This section of the chart presents the number of risks disclosed in the most recent report. You can see the change in the number of risks from the previous report, as well as the average number of risks for S&P 500 companies.
Recent Changes refers to the number of risks that were added, removed, or changed from the previous report.
Number of Risks Changed
You can see the total number of changes in this report, and how this compares to the previous one.
Risk Change Over Time
How have the company’s risks changed over time?
This handy chart lets you explore the risk history. You can look back at previous quarters and compare with either the S&P 500 or sector average.
Scroll down to see the changes made. You can look at the old text, the new text, or the text changes where you can see in green additional texts, or in red removed texts. Simply click on the See Changes tab.
The Sector Benchmark shows you how the stock you are researching compares with other companies in the same sector. Red indicates that the stock has more risks in the category, and green that it has fewer. Hover on a category for a breakdown and for an explanation about the category.