Compustat

Compustat is a massive, incredibly detailed database of financial, statistical, and market information covering thousands of public companies globally. Think of it as the Fort Knox of financial data. Owned and operated by S&P Global Market Intelligence, the platform is the gold standard for institutional investors, academics, and financial analysts who need reliable, standardized data stretching back decades. Compustat meticulously collects information from company financial statements and other sources, cleaning it up and organizing it into a consistent format. This standardization is its superpower, allowing for apples-to-apples comparisons between different companies, industries, and time periods. Whether you want to analyze a company’s revenue growth over the last 40 years or compare the profitability of every company in the S&P 500, Compustat is the definitive tool for the job. It's the engine behind countless academic studies and sophisticated quantitative analysis strategies on Wall Street.

Compustat is far more than just a list of stock prices. It’s a comprehensive library of corporate data, primarily broken down into two key areas.

This is the heart of Compustat. It contains standardized data points pulled directly from a company's core financial reports: the income statement, the balance sheet, and the cash flow statement. This includes hundreds of variables, such as:

• Revenue, operating costs, and net income
• Total assets, liabilities, and shareholders' equity
• Cash from operations, investing, and financing activities
• Industry-specific metrics for banks, utilities, and more

The beauty is that Compustat adjusts the data to account for different accounting practices, making it far easier to compare a company in the U.S. with one in Germany than by simply looking at their raw filings.

Alongside the fundamental company data, Compustat includes extensive market information. This allows users to connect a company's operational performance to its stock market performance. Key data points include:

• Historical stock prices (adjusted for splits and dividends)
• Trading volume
• Dividends paid per share
• Shares outstanding, which is needed to calculate market capitalization

By combining this market data with financial statement data, analysts can calculate an endless array of valuation ratios, like the P/E ratio or dividend yield, for thousands of companies over many years.

For followers of value investing, Compustat is like a time machine and a metal detector rolled into one. While most individual investors will never get direct access to it (more on that below), understanding what it does reveals the power of data-driven investing.

Backtesting is the practice of using historical data to test how an investment strategy would have performed in the past. It’s a crucial way to see if an idea has merit before risking real money. Compustat's deep, clean historical data is the perfect playground for this. A value investor could, for example, test a strategy inspired by Benjamin Graham: “What if I had bought all the stocks trading at less than two-thirds of their net current asset value from 1980 to 2020 and held them for one year? What would my return have been?” Compustat makes answering such questions possible and is the reason we know that many fundamental value strategies have historically worked so well.

Imagine trying to find a needle in a haystack. Now imagine you have a giant magnet. That's what Compustat is for stock screening. An investor can set very specific criteria to filter through tens of thousands of companies and find the handful that meet their exact requirements. For example, a follower of Warren Buffett might screen for companies with:

• A return on equity consistently above 15% for the last 10 years.
• Debt-to-equity ratio below 0.5.
• A current P/E ratio below the industry average.

This process, which would take a lifetime to do manually, can be done in minutes, highlighting potentially undervalued, high-quality businesses for further research.

Here’s the reality check: a subscription to Compustat can cost tens of thousands of dollars per year. It's almost exclusively licensed by universities for academic research and by large financial institutions like hedge funds and investment banks. It is not designed for the “ordinary investor.” So, what can you do? Thankfully, the spirit of Compustat is more accessible than ever.

• Free Resources: Websites like Yahoo! Finance and Google Finance offer a fantastic amount of free historical data, often going back over 20 years. For original, unfiltered data, the U.S. SEC's EDGAR database is a treasure trove of company filings like the Form 10-K and Form 10-Q.
• Affordable Stock Screeners: Numerous online platforms offer powerful stock screening tools for a modest monthly fee. While they may not have 50+ years of perfectly standardized data, they are more than capable of helping you execute sophisticated value investing screens to find your next great investment.