capital-allocation

Perform a deep dive into capital allocation for the company named in the user's request. If no ticker or company is provided, ask for one before proceeding. **Before starting, read `../data-access.md` for data access methods and `../design-system.md` for formatting conventions.** Follow the data access detection logic and design system throughout this skill. Follow these steps: ## 1. Company Lookup Look up the company by ticker using `discover_companies`. Capture: - `company_id` - `latest_calendar_quarter` — anchor for all period calculations below (see `../data-access.md` Section 1.5) - `latest_fiscal_quarter` - Firm name for report attribution (default: "Daloopa") — see `../data-access.md` Section 4.5 ## 2. Market Data Get the current stock price, market cap, and shares outstanding for {TICKER} (see `../data-access.md` Section 2 for how to source market data in your environment). - This is needed to compute yields and per-share metrics If market data is unavailable, note that market-derived metrics (yields, etc.) cannot be computed and proceed with Daloopa data only. ## 3. Capital Allocation Data Calculate 8 quarters backward from `latest_calendar_quarter`. Pull: **Share Count & Buybacks:** - Diluted shares outstanding - Share repurchase amounts (dollars) - Shares retired/repurchased (units, if available) **Dividends:** - Dividends per share - Total dividend payments - Special dividends (if any) **Cash Flow:** - Operating Cash Flow - Capital Expenditures - Free Cash Flow (compute as OCF - CapEx, label "(calc.)") - D&A (for reference) **Balance Sheet:** - Cash and equivalents - Short-term investments / marketable securities - Total debt (short + long term) - Net debt (compute as Total Debt - Cash - Investments, label "(calc.)") **M&A / Investments:** - Search for "acquisition", "purchase of business", "investment" in series - Pull any available M&A-related series ## 4. Compute Capital Allocation Metrics Calculate for each quarter where data is available: **Shareholder Returns:** - Total Buyback Amount - Total Dividend Amount - Total Shareholder Return = Buybacks + Dividends - Shareholder Yield = (Buybacks + Dividends) / Market Cap (annualized) - Buyback Yield = Buybacks / Market Cap (annualized) - Dividend Yield = Dividends / Market Cap (annualized) **FCF Deployment:** - FCF Payout Ratio = Total Shareholder Return / FCF - CapEx as % of Revenue - CapEx as % of OCF - FCF Margin = FCF / Revenue **Leverage:** - Net Debt / EBITDA (if EBITDA available; compute from Operating Income + D&A if needed) - Net Debt / Equity - Interest Coverage = Operating Income / Interest Expense (if available) - Cash as % of Market Cap **Share Count Dynamics:** - QoQ share count change - YoY share count change - Implied buyback rate (QoQ % reduction) - At current buyback rate, years to retire X% of shares ## 5. Qualitative Research Search SEC filings for capital allocation strategy and context. Try multiple searches: - **Buyback program**: Try "repurchase program", "share repurchase"; fallback to "buyback", "authorization" - **Dividend policy**: Try "dividend", "capital return"; fallback to "distribution", "payout" - **M&A strategy**: Try "acquisition", "strategic"; fallback to "purchase", "investment" - **Capital priorities**: Try "capital allocation", "priorities"; fallback to "deploy", "balance sheet" - **Debt management**: Try "debt", "refinance"; fallback to "leverage", "maturity" Extract: - Board-authorized buyback programs (remaining authorization amount) - Dividend policy (commitment to growth, payout ratio targets) - M&A philosophy (bolt-on vs transformational, deal pipeline commentary) - Management's stated capital allocation framework and priorities - Any changes in capital allocation strategy - Direct quotes with document citations ## 6. Historical Analysis & Value Judgment Analyze the 8-quarter trend: - Is buyback activity accelerating or decelerating? - Is the company buying back more shares when price is lower (disciplined) or higher (less disciplined)? - Dividend growth rate (if applicable) - Shift between CapEx, buybacks, dividends, and debt repayment over time - FCF conversion trend (is more/less of OCF converting to FCF?) **Honestly assess whether capital allocation is creating or destroying value:** - If the company is buying back stock at all-time-high prices with deteriorating fundamentals, call it value destruction — even if EPS looks better from the lower share count. - If the company is under-investing in CapEx or R&D to fund buybacks, flag the risk to long-term competitiveness. - If FCF payout ratio exceeds 100%, the company is funding returns with debt or cash drawdowns — flag this as unsustainable. - Compare the implied return from buybacks (inverse of P/E at purchase prices) to what the company could earn from organic reinvestment or M&A. ## 6.5. Reinvestment Assessment Assess whether the company is adequately reinvesting in its business or funding returns at the expense of long-term competitiveness. **Pull reinvestment metrics (8 quarters):** - R&D expense (and R&D as % of revenue) - Capital Expenditures (and CapEx as % of revenue) - Key growth KPIs relevant to the business model (use sector taxonomy): - **SaaS/Cloud**: ARR, net revenue retention, RPO/cRPO, customers >$100K - **Consumer Tech**: DAU/MAU, ARPU, installed base, paid subscribers - **E-commerce/Marketplace**: GMV, take rate, active buyers/sellers - **Retail**: same-store sales, store count, average ticket - **Telecom/Media**: subscribers, churn, ARPU, content spend - **Hardware**: units shipped, ASP, attach rate - **Financial Services**: AUM, NIM, loan growth, fee income ratio - **Pharma/Biotech**: pipeline stage, patient starts, scripts, market share - **Industrials/Energy**: backlog, book-to-bill, utilization, production volumes **Assess reinvestment adequacy:** - Is R&D/revenue trending down while buybacks are increasing? This may indicate the company is funding shareholder returns by underinvesting in innovation. - Is CapEx/revenue declining while the business requires sustained infrastructure investment (e.g., cloud, manufacturing, stores)? - Are growth KPIs (subscriber adds, customer growth, same-store sales) deteriorating while capital returns are at record levels? This is a red flag — the company may be harvesting rather than growing. - Compare R&D intensity and CapEx intensity vs peers (if available from the industry or comps skills). Is the company investing more or less than competitors? **Value creation vs extraction verdict:** - Net assessment: Is the company's capital allocation creating long-term value (reinvesting at high ROIC, buying back cheap stock, growing dividends sustainably) or extracting value (under-investing to fund buybacks at premium valuations, leveraging up for returns)? ## 7. Save Report Save to `reports/{TICKER}_capital_allocation.html` using the HTML report template from `../design-system.md`. Write the full analysis as styled HTML with the design system CSS inlined. This is the final deliverable — no intermediate markdown step needed. Structure the report with these sections: ``` <h1>{Company Name} ({TICKER}) — Capital Allocation Analysis</h1> <p>Generated: {date}</p> <h2>Summary</h2> {2-3 sentences: How does this company deploy its capital? Key takeaways.} <h2>Current Snapshot</h2> <table> | Metric | Value | | Market Cap | $XXX | | Trailing 4Q FCF | $XXX | | FCF Yield | X.X% | | Shareholder Yield | X.X% | | Net Debt / EBITDA | X.Xx | | Remaining Buyback Authorization | $XXX | </table> <h2>Cash Flow & FCF (8 Quarters)</h2> <table> | Metric | Q1 | Q2 | ... | Q8 | {OCF, CapEx, FCF, FCF Margin % — with Daloopa citations} </table> <h2>Share Repurchases & Dividends (8 Quarters)</h2> <table> | Metric | Q1 | Q2 | ... | Q8 | {Buyback $, Dividends $, Total Return, Share Count — with Daloopa citations} </table> <h2>Shareholder Yield Analysis</h2> <table> | Metric | Q1 | Q2 | ... | Q8 | {Buyback Yield, Div Yield, Total Yield, FCF Payout Ratio} </table> <h2>Leverage & Balance Sheet (8 Quarters)</h2> <table> | Metric | Q1 | Q2 | ... | Q8 | {Cash, Debt, Net Debt, Net Debt/EBITDA — with Daloopa citations} </table> <h2>Capital Allocation Framework</h2> {Management's stated priorities from filings, with document citations} <h2>Reinvestment Assessment</h2> <table> | Metric | Q1 | Q2 | ... | Q8 | {R&D, R&D % Rev, CapEx, CapEx % Rev, key growth KPIs — with Daloopa citations} </table> {Analysis: Is the company adequately reinvesting? R&D/CapEx trends vs growth KPI trends. Value creation vs extraction verdict.} <h2>Buyback Discipline Analysis</h2> {Analysis of buyback timing vs price, share count reduction trend, authorization remaining} <h2>M&A Activity</h2> {Any acquisitions from filings, deal sizes, strategic rationale} <h2>Key Observations</h2> <ul>{3-5 bullet points on capital allocation quality, trends, and implications}</ul> ``` All financial figures must use Daloopa citation format: `<a href="https://daloopa.com/src/{fundamental_id}">$X.XX million</a>` Tell the user where the HTML report was saved. Highlight the key capital allocation story (e.g., "AAPL returned $XX billion to shareholders over the last year, a X.X% shareholder yield, with buybacks accelerating").