Management Assessment – How to Evaluate the Quality of a Company’s Management

One of the main purposes of a management assessment is to evaluate whether the goals outlined in the Management’s Discussion and Analysis (MD&A) have been achieved. To do so, it is necessary to compare the accomplished results from the latest MD&A with the preset goals from the prior MD&A. For a more extensive assessment, older MD&As can also be included in this comparison.

If management’s failure to achieve preset goals is not explained in the MD&A, contacting the company’s management by email for an explanation is recommended. An honest, timely, and correct response is a sign of a good management team that is consistent with their promises and actions. If management does not respond or responds unsatisfactorily, it is a red flag for potential investors.

When and Where to Find Your Stock’s Management Discussion and Analysis (MD&A)?

To find a company’s MD&A, it is typically filed at the same time as the company’s financial statements and can be found on the company’s website. For American listed stocks, the MD&A is also filed on the SEC; website, while for Canadian listed stocks, it can be found on the SEDAR website. You can often find it on the company’s own website too.

Company Announcements Evaluation

In addition to evaluating the MD&A, studying the information presented in the company’s latest investor presentation and press release archive can also provide valuable insights. The investor presentation aims to convince potential investors to invest in the company, so it is important to assess whether management’s arguments are convincing. Press releases related to personnel changes in key management positions, changes in the company’s assets, and changes in its financial results are typically relevant for stock investment analysis.

To further evaluate a company’s management, consider reading the articles on the Key Management PositionsManagement Compensation, and Management Evaluation, which provide guidance on what competencies to look for in management, where to find management compensation data, and which questions to ask when assessing management quality.

Note: Contacting management directly for an explanation can provide additional insights into management’s performance, and their response can indicate the quality of their communication and consistency with their promises and actions.

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