The Struggle to Obtain Accurate Fundamental Data: An In-depth Analysis
Professional players who invest in stock companies, managers who set up and manage funds, business law firms or students of economics are dependent on financial data. On the basis of key figures from annual reports, for example, fundamental analysis can be used to minimize investment risk. In particular, the development of financial ratios in past crisis periods allows conclusions to be drawn about profitability, moat, management and other relevant key points that speak for or against an investment. The aggregation of fundamental values of entire sectors, industries and regions, allow statements about the state and potential development of markets.
There are no free downloads of fundamental data going back more than ten years of business. If an analyst then collects the free data from several sources, the data must then be corrected and homogenized at great expense. Since financial portals such as Yahoo Finance do not usually compile their data themselves, they have to purchase it with considerable licensing restrictions. This is why such financial websites cannot offer comprehensive data downloads for their users. There are only a few providers with powerful APIs that deliver complete and validated data series on stock companies for many years. These APIs are relatively expensive and hardly affordable for private investors and analysts.
Fintech startup SimFin is addressing these challenges. Its goal is to offer investors a stock analysis platform with high-quality financial data and innovative analysis tools. What it all looks like, why it is so difficult to get free fundamental data and which providers currently dominate the market are the topics of this article.
Table of Contents
1. Stock culture in Germany: a reason for the lack of stock analysis platforms?
2. Who dominates the financial data market?
2.1 The Bloomberg Terminal
2.2 Thomson Reuters
2.3 S&P Capital IQ Pro Platform
3. Are there any free alternatives?
4. The solution approach of SimFin
1. Equity culture in Germany: a reason for the lack of equity analysis platforms?
The stock culture in Germany is considered to be underdeveloped. If you look at the figures on Statista, you will see that the shareholder ratio, i.e. the proportion of people who are directly invested in shares, has fluctuated between 5 and 7 million for decades.
Number of direct shareholders in Germany (1988-2021)
In 2020, many people, especially the younger generation, had discovered the stock market for themselves. According to the financial flow, more people invested during the Corona crisis than in 20 years.
Compared to other Western countries, the share ratio remains low. Switzerland has about 20% investors, Sweden about 19%, the U.S. 25%, and so on. Many countries also have a sovereign wealth fund that invests in the capital markets, thereby boosting the pension system. The German state supports the equity culture only marginally at best. For example, since the financial crisis (2008), the tax conditions for long-term wealth accumulation via the stock market have deteriorated. The holding period for profits was abolished, a 25% tax rate was introduced on capital gains, and the tax-free allowance was massively reduced. Currently (December 2022), there are discussions about basing part of the pension system on the model from Sweden. However, an investment of 10 billion, which is currently under discussion, is far too low.
Since it is well known that the market regulates the prices for supply and demand, it is not surprising that there are hardly any providers for data APIs in Germany given the existing share culture. Banks, fund companies and insurance companies fall back on the American systems like Bloomberg & Co. and the private investor is left out. Furthermore, it is also a great challenge for financial companies to build up a database for securities themselves. Such an undertaking is extremely time-consuming, costly and also requires the necessary personnel.
2. Who dominates the financial data market?
There are now many providers for APIs, especially on the American market. Four major providers have established themselves:
Thomson Reuters / Refinitiv
Data APIs contain fundamental data from annual reports. These present past and current data on traded assets currently in the market. Data sets include, but are not limited to, information on:
Earnings per share (diluted)
Net operating cash flow
Free cash flow
In addition, there are also APIs for dividends, as well as past day data related to F-Score, price-to-book ratio (P/B), price-to-earnings ratio (P/E), real-time data information, etc. The four major providers have vast amounts of data sets. However, only a few of these are available for free. If you want to dive into the depths, you need paid access. The providers differ in their conditions.
2.1 The Bloomberg Terminal
With the Bloomberg Server API (SAPI), users have the ability to access real-time and market data, historical and key reference data, and calculation tools. In addition, Bloomberg also has access to corporate updates.
Bloomberg API Homepage
The terminal has existed for over 40 years and is characterized by an infrastructure for global markets. It was invented by Michael Bloomberg, who gave it its name. All data coming from SAPI is created in a single standardized language, the BLP API. Roughly speaking, it is a Windows-based application compatible with the Excel program. The terminal contains both a hardware and a software system.
There is a possibility to test a demo version of Bloomberg Terminal. The secret of the terminal's success lies especially in its chat and e-mail function. This allows access to an exclusive social network of financial experts. The personal exchange makes business possible in the Bloomberg chat. The annual subscription fee ranges approximately from $24,000 to $28,000 per user per year. The high cost makes access virtually impossible for retail investors. Therefore, the terminal is mainly used by large institutional investors, portfolio managers and financial analysts working for a large bank or similar.
2.2 Thomson Reuters / Refinitiv
Bloomberg's biggest competitor is Thomson Reuters. With its application Eikon, the latter offers a range of software products.
Platform Refinitiv Eikon
They support users in analyzing and trading on the financial markets. In 2010, Eikon replaced the 3000 Xtra electronic trading platform, which had been in operation since 1999. In 2018, Bloomberg's market share was about 32.5% and Thomson Reuters' was 22%. That same year, the inventor struck a deal with private equity firm Blackstone, selling a 55% stake in the company for gross proceeds of about $17 billion. For this reason, the platform was renamed Refinitiv Eikon. Refinitiv has been part of LSEG (London Stock Exchange Group) since February 2021.
The main source of revenue for the Canadian group is the data business. The revenues amount to about half of the total revenue. The platform became known in particular through the Reuters news agency. Those who use Refinitiv Eikon get access to industry-leading data, insights and exclusive news. As with Bloomberg, there is the ability to share and maintain contacts across 30,000+ companies in 180+ countries via collaboration and messaging tools. Geographic coverage of the data includes the entire world:
Asia / Pacific
Latin America and Caribbean
The market data gives real-time and historical insights from thousands of sources, while unique tools such as StarMine Analytics and MarketPsych help users identify opportunities and make better predictions. The cost of Eikon is about $22,000 per year. A limited-feature version is available for about $3,600 per year.
2.3 S&P Capital IQ Pro Platform
If you are an investor and want to follow the stock markets and get the developments within seconds, you can use S&P's Capital IQ platform as an alternative to the providers already mentioned.
S&P Capital IQ Pro
The platform is characterized by reliable and transparent fundamental data. Whether it is financial statements, balance sheet reports, profit & loss data or multiples and press releases, they are available for timely analysis within a few hours of publication.
The S&P Capital IQ Pro platform runs on a cloud. Users can access S&P Global directly, query third-party data, and complete the data collection process in the shortest amount of time. Unparalleled breadth and depth of data, news and research meet technically advanced productivity tools. Industry-specific data includes 29+ million reports and 50+ million companies analyzed. More than 250 journalists work for the global newsroom. ESG intelligence for sustainability data and analysis is part of the platform, as are credit ratings from S&P Global. Data is easily connected to Microsoft Office and displayed in the Excel program. Integration from Excel into PowerPoint or Word it also straightforward. The pricing of Capital IQ is not public. The price depends on individual needs and the information requirements of the customers.
The top dogs in the industry are getting more and more competition from other vendors who are bringing similar products to market at a lower price. FactSet is one of them. Meanwhile, this has risen to become the fourth largest marketer of data APIs in the industry.
Factset HomepageIn 2017, FactSet had 89,000 customers with total revenue of approximately $1.3 billion. The cost of a subscription is $12,000 US per year. For that, users get more than 750 fundamental items, including financial statement data, derived metrics, and annual reports and geographic segments.
The history of company data, annual and interim/quarterly data, all relevant ratios, income statements (P&L), and detailed financial statements give users a good overview to develop a global investment perspective and make better investment decisions. FactSet has fundamental data from 1980 onwards and covers the world's developed and emerging markets. All newly listed companies with gross proceeds of at least $25 million are regularly integrated. The latest annual and interim periods are available on the day of listing. In America, IPOs are monitored by the U.S. Securities and Exchange Commission (SEC). The same applies to securities transactions. Previous annual and interim periods are collected and made available within five business days of going public. Performing in-depth balance sheet analysis is one of the provider's main applications.
3. Are there also free alternatives?
On the German market there are only very limited options to access free fundamental data. One of the few is Guidants. This is an individually adaptable investment and analysis platform. It was founded around the turn of the millennium by BörseGo AG. In the meantime, the platform has changed its name to stock3.
Guidants / stock3
This provides personalizable desktops and widgets and offers a live ticker in real time.
The platform also has a stock screener, allows comparison of multiple companies and has various social media functions that allow users to exchange information with each other and with selected experts. Registration is required for some free features. stock3 is browser-based, eliminating the need for software installation. In addition to many free tools, there are also paid pro versions that include additional functions.
A free alternative from America is Morningstar. The key figures go back up to ten years, depending on the company.
As is often the case, more data is available in a paid version. For a first orientation and fundamental analysis, the most important key figures are available. These allow some conclusions about the development and success of the corporation. The key figures are, for example, the sales for the fiscal year, P&L, debts, etc.
The third free analysis platform to be mentioned is GuruFocus. The provider is, - as he writes himself, - since 2004 in the service of global value investors.
It provides a combination of historical, financial and valuation data, as well as a powerful screener, charts and comparison tools.
The platform focuses in particular on American companies. Even the summary displays some important data. These include:
Current valuation in terms of profitability, growth, liquidity, etc.
Description of the corporation
In the paid version, users get access to 30 years of history. In the free version, a time series for the last four years is displayed. The sum of data for this period is also extremely extensive.
Those who want to perform a superficial analysis can usually find a few key data on Yahoo Finance.
At finanzen.net, users can go to the Fundamental function after entering the company they are looking for. There, users usually have access to data going back six years for the selected company.
Finanzen.net Investment Homepage
These include some company key figures. These include dividend yield, P&L, balance sheet, total liabilities, etc. Yahoo Finance presents a small selection of data going back four years. These include the P&L, balance sheet and cash flow. Normally, finance portals buy the data expensively from the big players in the industry and do not offer downloads.
4. The SimFin solution approach
SimFin stands for "Simplifying Finance." The company recognized the problem of data scarcity several years ago and offered low-cost fundamental data for several thousand US stocks in bulk download or via a Python API. In February 2023, SimFin has launched a new platform (www.simfin.com) that offers advanced data downloads, a stock screener, and a backtesting tool all in one access.
SimFin.com - Analytics & Data API
SimFin offers registered users of its platform an easy-to-use interface, intuitive stock analysis tools, and premium financial data. These support users in developing winning strategies to make successful investments.
To ensure that everyone can benefit from the service, users of the free version already have access to all relevant SimFin functions. The focus is on fundamental company data, i.e. the values from the profit and loss statement, the balance sheet, etc. For key figures older than five years, an upgrade to a paid package is required.
The new SimFin platform has a very performant data API. This includes the most important American stock companies (approx. 4,000) with a 20-year history (back to 2003). The data is of the highest quality. They have been extracted, validated and structured by SimFin from the original reports. By the end of 2023, European share data will be successively added to the platform to the same extent. Currently, SimFin's experts add 28 million new data points to the API every day, as 7,000+ metrics derived from stock prices need to be recalculated daily. Quarterly and annual additions take place from annual reports. SimFin extracts these within a day of publication thanks to its machine learning processes, evaluates them and makes them available to users. The highlight is that analysts can trace each data point back to the statement of the original report with a mouse click and thus validate it very easily.
The German population's interest in shares has risen again somewhat in recent years, especially among the younger generation. The need to make private provisions for retirement is unavoidable, as the pension system does not provide sufficient old-age security due to demographic change as well as the pay-as-you-go system. Compared to all other asset classes (real estate, gold, cryptocurrencies, etc.), equities have the highest return potential, provided the investment is designed for at least 10 to 15 years in the long term. Fundamental data helps any potential investor to learn in detail about the stock market and company analysis. Established companies like Bloomberg and Thomson Reuters charge high fees for their APIs. Fintech startup SimFin actively combats high-priced data APIs and already provides high-quality fundamental data for download in the free version. In addition, SimFin's access offers an innovative stock screener, the results of which can be checked immediately via backtesting.
Important: The information provided in this blog is for educational and informational purposes only and should not be construed as investment advice. The author is not a registered investment advisor and does not provide personalized financial or investment advice. All investments involve risk, and past performance is no guarantee of future results. It is recommended to consult with a professional financial advisor before making any investment decisions. The author and publisher shall not be held liable for any losses incurred as a result of the use of the information presented in this blog.
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