financial-metrics-analysis

# Financial Metrics Analysis

Retrieve and analyze year-over-year growth in key income statement items for public companies using the Octagon MCP server.

## Prerequisites

Ensure Octagon MCP is configured in your AI agent (Cursor, Claude Desktop, Windsurf, etc.). See [references/mcp-setup.md](references/mcp-setup.md) for installation instructions.

## Workflow

### 1. Identify Analysis Parameters

Determine the following before querying:
- **Ticker**: Stock symbol (e.g., AAPL, MSFT, GOOGL)
- **Records**: Number of periods to retrieve (e.g., 5 years)
- **Period**: FY (fiscal year) or Q (quarterly)

### 2. Execute Query via Octagon MCP

Use the `octagon-agent` tool with a natural language prompt:

```
Retrieve year-over-year growth in key income-statement items for <TICKER>, limited to <N> records and filtered by period <FY|Q>.
```

**MCP Call Format:**

```json
{
  "server": "octagon-mcp",
  "toolName": "octagon-agent",
  "arguments": {
    "prompt": "Retrieve year-over-year growth in key income-statement items for AAPL, limited to 5 records and filtered by period FY"
  }
}
```

### 3. Expected Output

The agent returns a tabular response with YoY growth percentages:

| Year | Revenue Growth | Cost of Revenue Growth | Gross Profit Growth | Operating Income Growth | Net Income Growth |
|------|----------------|------------------------|---------------------|-------------------------|-------------------|
| 2024 | 2.0%           | 1.5%                   | 3.1%                | 5.2%                    | 4.8%              |
| 2023 | -2.8%          | -1.2%                  | -4.5%               | -8.1%                   | -10.2%            |
| ...  | ...            | ...                    | ...                 | ...                     | ...               |

**Data Sources**: octagon-companies-agent, octagon-financials-agent

### 4. Interpret Results

See [references/interpreting-results.md](references/interpreting-results.md) for guidance on:
- Reading growth percentages
- Identifying trends and inflection points
- Spotting operating leverage signals
- Comparing to industry benchmarks

## Example Queries

**Basic YoY Analysis:**
```
Retrieve year-over-year growth in key income-statement items for AAPL, limited to 5 records and filtered by period FY.
```

**Quarterly Analysis:**
```
Retrieve year-over-year growth in key income-statement items for TSLA, limited to 8 records and filtered by period Q.
```

**Extended Historical View:**
```
Retrieve year-over-year growth in key income-statement items for MSFT, limited to 10 records and filtered by period FY.
```

## Key Metrics Explained

| Metric | Definition |
|--------|------------|
| Revenue Growth | YoY change in total revenue/sales |
| Cost of Revenue Growth | YoY change in direct costs (COGS) |
| Gross Profit Growth | YoY change in Revenue minus COGS |
| Operating Income Growth | YoY change in income from operations |
| Net Income Growth | YoY change in bottom-line profit |

## Analysis Tips

1. **Revenue vs Net Income divergence**: If Net Income grows faster than Revenue, the company is improving margins or reducing costs.

2. **Operating leverage**: When Operating Income grows faster than Revenue, fixed costs are being spread over more sales.

3. **Margin compression**: If Cost of Revenue grows faster than Revenue, margins are declining.

4. **Consistency**: Look for companies with consistent positive growth across all metrics.

5. **Trend reversals**: A switch from negative to positive growth often signals a turnaround.