Insight comes from 30 minutes clocking value via a study of company reports

How to analyse a result in 30 minutes: despite what you'll hear often, the market is mostly pretty efficient - cheap stocks are generally cheap for a reason and expensive stocks are generally expensive for a reason. Opportunities do appear, but the really good ones are few and far between and you have to sift through a lot of information to find them. With reporting season ramping up, that information will soon be flowing thick and fast.

This process of sifting for opportunities is one of the great skills of investing. Warren Buffett has famously invited anyone wanting to sell him a company to make a proposal - and says he'll customarily give an indication as to possible interest within five minutes.

I can't promise five minutes, but I am going to show you how to get the nuts and bolts out of a company's result in half an hour.

Expectations matter

Novice investors are sometimes surprised when a company announces a profit increase of 20 per cent and the share price falls. It's because market expectations matter. If investors were expecting a 25 per cent rise, a 20 per cent increase would be disappointing. So dig up the "consensus" earnings per share number beforehand.

Online and full-service brokers usually provide this information, as do sites such as Yahoo! Finance. But watch out, because the company might be reporting its earnings on a different basis to the brokers' forecasts.

You might also spend a few minutes thinking about what else to expect in the financial statements. Shareholders in carsales.com, for example, will expect to see cash paid out for stakes in iCar Asia and Webmotors Brazil in the 2013 financial year.

This reporting season, you should be aware of how companies with international operations report the effect of the falling Australian dollar. Most chose to report "constant currency" results when the dollar was a headwind. Now the dollar is a tailwind, you should expect them to report in the same terms. Be aware that the dollar's decline will inflate revenue and profit growth for companies with overseas businesses in 2013.

You're now nearly five minutes in and already prepared for potential surprises. So what happens when the company reports its results to the ASX?

You'll probably be tempted to head straight to the management presentation. It's colourful and easier to understand than the "preliminary final report" (the official title of the results document). Resist temptation and turn to the three main financial statements in the preliminary final report, each of which will account for another three minutes.

Cash flow first

The cash-flow statement should be your first stop. With a little practice, it's simple to understand. What's more, it's the statement that's hardest for management to manipulate.

The cash-flow statement helps you work out free cash flow. This is generally defined as operating cash flow (check to see that this is stated after interest and tax payments and deduct them if not) less investment expenditure (the main part of which is usually described as "payments for property, plant and equipment").

This tells you how much cash is left over for shareholders after the company has taken care of its business needs.

The cash-flow statement also tells you how much cash has been paid out as dividends, how much has been allocated to debt repayment, and how much has been raised from the issue of new shares.

Turn to the balance sheet next. Here's where you calculate net debt (short- and long-term borrowings less cash), the net debt-to-equity ratio (net debt divided by shareholders' equity) and other measures of financial health.

Have these ratios changed, and why? What has happened to intangibles, and why? Is inventory piling up? Running your eye down the balance sheet, line by line, is a useful exercise.

Now to the income statement. It can be a surprisingly inscrutable financial statement, particularly when "significant items" - usually negative ones such as write-downs - muddy the result.

Still, you should eyeball revenues and costs line by line, then calculate gross margins and operating margins (also known as earnings before interest and tax, or EBIT, margins).

If revenues are flat while costs are rising - which means margins are declining - you'll want to investigate why.

Spin class

The discipline of considering the three main financial statements first is important because your initial review will be unsullied by management commentary (or should that be "spin"?). But the financial statements usually raise more questions than they answer.

So your next 12 minutes is all about investigating the issues you've identified. Review the management presentation, notes to the accounts and any other accompanying commentary. If you noticed something unusual in the financial statements, such as a significant drop in operating cash flow, management should explain it in the supporting documents.

Your final few minutes should be spent on the company's outlook statement (if provided). Is management confident about the year ahead? Some management teams underpromise and overdeliver; others are too optimistic.

Here's where you should spend some time thinking about the company's future. After all, it's the company's future cash flows that determine its valuation.

A sober assessment of a business's prospects - including an analysis of industry headwinds and tailwinds - is vital.

Before you know it, your 30 minutes is up. Your calculator and your brain have officially had a good workout.

Just spare a thought for the professional analysts, who have to accomplish these mental gymnastics several times a

day during reporting season (they love

it, of course).

This article contains general investment advice only (under AFSL 282288).

Nathan Bell is the research director at Intelligent Investor Share Advisor, shares.intelligent

investor.com.au.