It’s often said, a picture is worth a thousand words... but we think that a picture is worth a thousand insights.  We’re going to show you how your graphs can take readers on a journey through data and provide insights they never expected to see. So, buckle your seat belt and get ready to make a bigger impact with your analyses.

Big Pharma in Pictures

Let’s say you want to analyze the pharmaceutical industry.  Using idaciti, we can graphically show the top ten pharmaceutical companies by revenues.

View This Graph - Big Pharma - Revenue

We can see that Johnson & Johnson (JNJ) is the largest firm in the industry. However, JNJ sells many products in addition to drugs. Since our goal is to analyze the pharmaceutical industry, let’s see what percentage of JNJ’s revenues are derived from pharmaceutical sales to determine if we keep it or remove it from our analysis.

Segment Drill Down - Diving into the Details

idaciti allows us to drill down into a company’s business segments easily. For some companies, we can drill all the way down to the product level, simply with one click of a button.

In the chart above, we see that pharmaceutical sales represent only 50% of JNJ’s total sales in FY2018.  That means half of JNJ’s business results will skew our analysis of the industry.  For the purpose of our analysis, let’s remove JNJ from our peer group.

For some companies, we can drill all the way down to the product level, simply with one click of a button. The company below is Pfizer.  We’ve broken out sales for the Internal Medicine unit of the Innovative Health segment.  This allows us quickly see which drugs comprise the largest percentage of segment sales and their corresponding growth trajectories.

Get a Baseline

Once we have reviewed the companies in our universe and created a peer group, we’ll want to establish some benchmarks for comparing the companies within our group. For this, we’ll look at the following metrics:  

  • Revenue growth
  • Gross, operating, and net margins
  • R&D as a % of revenues
  • Valuations

Revenue Growth

View This Graph - Big Pharma - Revenue Growth

Area charts can provide valuable insights into how the industry’s revenues grew over the past ten years.  Note the dramatic spike in sales in 2015.  This is due to idaciti’s use of XBRL data. In 2009, the SEC mandated that domestic companies begin reporting financial data using XBRL tagging.  Beginning in 2015, this requirement was expanded to include foreign entities that follow IFRS accounting practices.

If you are not familiar with XBRL, it’s a format for submitting financial information to the SEC that makes it machine-readable. By using machine-readable data, idaciti is able to provide normalized and comparable data with higher accuracy and consistency. The traditional document-centric methods of acquiring data can take days. Using XBRL as the foundation, idaciti is able to deliver usable data in minutes after the filings become available. You can learn more about the benefits of using XBRL data from the SEC.

Since foreign entities skew the revenue data for the given time period we’re using, let’s remove them from our graph.  The chart is dynamic, you can click the names in the legend to remove them. Once you do that, the graph above should now resemble the image below.

If the area chart doesn’t provide you with the insights you are looking for, we can use a trend chart to get a more granular view of revenue growth.

This type of graph plots year-over-year growth numbers for a particular company against its peer group. We can clearly see that Pfizer’s revenue growth has lagged the industry in all but one year.  Select a different company from the drop down menu that you want to benchmark - it’s as easy as that within idaciti.

View This Graph - Big Pharma - Sales Growth

Common Size Statement

Next, we’re going to look at the industry’s margins using a common size graph.  This will tell us if a particular company is more or less profitable than its peers.

View This Graph - Big Pharma - Common Size Statement

Pfizer is the clear winner when looking at profitability.  Its operating and net profit margins far surpass the competition.

Key Metrics - Research & Development

Every industry has certain metrics that drive sales and profits.  We’re going to turn again to idaciti’s trend chart. This provides a great way to highlight how a particular metric has changed over time relative to its peer group.

View This Graph - Big Pharma - R&D as % of Sales

We can see that Pfizer consistently spends less than its peers.  This may be good for profitability, but it may also foreshadow slower revenue growth in the future. Again, to view another metric, simply select it from the drop down menu.

In addition to Sales Growth and R&D as a % of Sales, an analyst may want to see how margins and diluted EPS have trended over time.  In the chart above, you can click the metric dropdown menu labeled Research and Deve… to view the other metrics available.

Valuation Comparables

Now that we have a good handle on the industry’s sales growth and margins, let’s look at valuations.  We’ll use a Scatter Plot graph to view Price to Sales (P/S) by revenue growth.

View This Graph - Big Pharma - Valuation Comps

From the graph above, we can see that Merck is an outlier.  We have two options. You could remove it from your peer group just for this analysis, or you could zoom in to view a subset of the group.  To do this, use your mouse to select a region of the screen and it will zoom to that region.  To zoom out, click the Reset button that appears when zoomed in.

We can see that P/S is positively correlated with year-over-year sales growth.  Using the dropdown above, you can view valuation against other factors affecting valuation. These include current and expected margins and growth rates.

Conclusion

idaciti makes it easy to quickly access, analyze, and engage with large amounts of data. There’s no need to endure hours of frustration sourcing and manipulating data, and building charts in Excel. With a few clicks of your mouse, idaciti lets you display data in ways that pop for your readers.  Not only will readers quickly understand your analysis, but they’ll be able to engage with it in a way, literally on the fly.

Your job as an analyst will be made easier, and your readers will quickly grasp the main points, and see the many compelling insights unfold.