Inderes.fi content development ideas

[lazyway]

@Thomas_Westerholm

In the table itself, it’s good to note that the analyst builds their recommendation around current pricing, so strongly linking the risk metric to the current price would lead to a situation where price movements would move the block on both axes of the metric.

Very good point. It is true that linking risk to share price / valuation multiples would make the risk meter move more often. But when the risk is stated in the inderes.fi stock window in the same table as the target price and recommendation, which are moved quite often, it would be logical and obvious to the reader that the risk component would also be updated along with the other metrics.

Displaying the metrics in the same table implies that the metrics are updated at the same frequency and have an interdependency. The recommendation is tied to the stock price at the time of the update. The target price is tied to the information available at the time of the update regarding outlook and market. By the same logic, the risk in the table should be updated to reflect the prevailing information at the time of the update.

Just as the target price and recommendation are stated to look approximately 12 months ahead, logically the risk metric should also describe the stock’s risk over the same period. If the risk looks further or shorter, it should be clearly communicated to the reader.

If and when the current risk metric looks approximately 12 months ahead, valuation multiples and macroeconomics are emphasized, and the importance of company quality decreases. A high-quality company performs well over cycles, but even it is not immune to a sudden correction of high valuation multiples or a selling wave caused by market disturbance.

@Thomas_Westerholm

I think it’s entirely justified to consider whether that risk metric is trying to be unnecessarily multi-dimensional by considering both business and stock risk. Interpreting that table clearly causes certain challenges, so we have room to improve in this matter. Perhaps separating business risk and stock risk would help here?

Excellent idea!
Titling business risk and stock risk as separate categories would remove reader confusion about what the current “risk” title describes. Now, some might perceive it as an assessment of stock volatility in a 12-month outlook, while others might perceive it as business stability and defensiveness.

@Thomas_Westerholm

I would ask for some flexibility at that point, because if low risk requires truly low exposure to changes in financial conditions, “low” risk investments can be very difficult to find. For example, US Treasury bonds are often used as a measure of risk-free return, but their market price also drops rapidly when interest rates rise.

It might sound like nitpicking, but perhaps presenting risk in terms of “lower” and “higher” would be more descriptive when talking about stocks. As you said, absolutely low-risk investments are hardly found on the stock exchange.

You shouldn’t take these comments of mine as criticism, but rather as a reader’s “user experience” in reading and understanding these metrics. Your analysis is sound. This is about these few metrics and their presentation, which summarize your analysis. Your content is read by people who have invested for decades as well as those who are just starting to invest, so sometimes even individual wordings can be important for the investor to understand what is being discussed and what is meant.