Financial Analyst Best Practices: Pro Tips for Using Sankify Daily

Why Best Practices Matter for Financial Analysis

Financial analysts process enormous amounts of data daily. The difference between good analysts and great ones often comes down to methodology—having systematic approaches that surface insights consistently. Sankify transforms how analysts interact with financial data, but like any powerful tool, its value multiplies when used deliberately.

This guide distills techniques from financial analysts who use Sankify daily. These aren't theoretical concepts—they're battle-tested practices that improve analysis speed and insight quality.

Identifying Revenue Concentration Risks

Revenue concentration is one of the most critical risk factors investors overlook. A company might appear healthy with growing revenue, but if that growth depends on a handful of customers or a single product line, the business is more fragile than the numbers suggest.

The Visual Advantage

In traditional financial analysis, spotting concentration requires calculating segment percentages and comparing them over time. With a Sankey diagram, concentration is immediately visible:

• **Wide, dominant flows** indicate concentrated revenue sources
• **Thin, multiple flows** suggest diversification
• **Changes in flow width over time** reveal evolving concentration

What to Look For

**Single Segment Dominance**: When one revenue stream represents more than 50% of total revenue, that's a concentration risk. The Sankey makes this obvious—one flow dominates the visual.

**Customer Concentration**: Some 10-K filings disclose when a single customer represents more than 10% of revenue. Cross-reference this with the Sankey visualization to understand the impact.

**Geographic Concentration**: Companies with international operations show geographic revenue splits. A business heavily dependent on one region faces currency and political risks.

Red Flag Patterns

Watch for these patterns in sequential Sankey diagrams:

1. **Shrinking diversification**: Multiple revenue streams converging into fewer over time
2. **Growing dependency**: One segment's share increasing quarter over quarter
3. **Disappearing segments**: Revenue sources that were material becoming immaterial

Practical Application

When analyzing a new company, generate Sankey diagrams for the last four quarters and the last two years. Animate between them mentally or place them side by side. Ask: Is revenue becoming more or less concentrated? What happens to the business if the largest segment declines 20%?

Spotting Business Model Changes

Companies evolve. Sometimes the change is intentional strategy; sometimes it's market-driven adaptation. Either way, business model changes have profound implications for valuation and risk.

How Business Models Appear in Flow Diagrams

A company's business model manifests in how revenue flows through the income statement:

• **High gross margins** suggest pricing power, intellectual property, or network effects
• **High operating expenses relative to gross profit** indicate heavy investment (R&D, sales) or inefficiency
• **Thin net income flows** despite healthy revenue might indicate structural margin pressure

Tracking Changes Over Time

The most valuable use of Sankify for spotting business model changes is temporal comparison. Generate diagrams for:

• **Current quarter vs. year-ago quarter**: Seasonal adjustments matter
• **Full year vs. prior year**: Smooths quarterly volatility
• **Current vs. three years ago**: Reveals longer-term transformation

Case Study Patterns

**Hardware to Services Transition**: Apple's evolution from hardware-dominant to services-significant shows up clearly in Sankey diagrams. The services revenue flow widened over time, while its higher margins meant the profit flow from services grew even faster than its revenue share.

**Advertising Model Adoption**: When companies add advertising revenue (like streaming services or retailers), a new high-margin flow appears. Watch how this flow grows relative to existing revenue streams.

**Platform Model Emergence**: Companies becoming platforms show increasing revenue from third-party transactions. The Sankey reveals whether platform revenue is additive or substitutive.

Questions to Ask

When comparing historical Sankey diagrams:

• Is gross margin expanding or contracting?
• Are operating expenses growing faster or slower than revenue?
• Is net income margin improving despite reinvestment?
• Have new revenue categories emerged?

Comparing Companies Effectively

Competitive analysis traditionally involves building multi-tab spreadsheets with carefully aligned metrics. Sankey diagrams offer a faster first-pass approach.

The Comparison Framework

When comparing companies, standardize your approach:

1. **Same time period**: Always compare the same fiscal quarter or year
2. **Same diagram type**: Use consistent Sankey configurations
3. **Size-adjusted thinking**: Remember that flow widths are proportional within each diagram, not across diagrams

What Comparisons Reveal

**Margin Structure Differences**: Two companies with identical revenue might have vastly different Sankey shapes. Company A might show a wide gross profit flow that narrows significantly through operating expenses. Company B might show thinner gross profit that mostly survives to net income. These are fundamentally different businesses.

**Investment Intensity**: R&D-heavy companies show significant operating expense flows. Sales-heavy companies show SG&A dominance. The Sankey instantly reveals where each competitor invests.

**Capital Efficiency**: Some companies convert revenue to net income efficiently; others face structural headwinds. The visual ratio of net income flow to revenue flow tells the story.

Building Mental Models

Experienced analysts develop pattern recognition for industry archetypes:

• **SaaS businesses**: High gross margins, heavy R&D and sales spend, improving operating margins at scale
• **Retailers**: Thin gross margins, tight operating expense control, volume-dependent profitability
• **Hardware manufacturers**: Moderate gross margins, significant cost of goods sold, R&D investment requirements
• **Advertising platforms**: Exceptional gross margins, heavy infrastructure costs, winner-take-most dynamics

When a company's Sankey deviates from its industry archetype, investigate why. The deviation might indicate differentiation or dysfunction.

Practical Comparison Workflow

1. Identify 3-5 direct competitors or comparable companies
2. Generate same-period Sankey diagrams for each
3. Arrange diagrams for visual comparison
4. Note the major structural differences
5. Investigate the business reasons behind those differences
6. Factor insights into your investment thesis

Presenting Financial Insights Compellingly

Analysis only matters if it influences decisions. Whether presenting to portfolio managers, investment committees, or clients, how you communicate findings determines their impact.

The Communication Advantage

Traditional financial presentations suffer from predictable problems:

• Dense tables that audiences scan without absorbing
• Too many numbers competing for attention
• Key insights buried in data
• Cognitive overload leading to disengagement

Sankey diagrams solve these problems by:

• Making structure immediately visible
• Highlighting proportions without calculation
• Telling a story through visual flow
• Engaging viewers who tune out tables

Presentation Best Practices

**Lead with the Insight**: Don't build up to your conclusion—start with it. "This company's margin structure is deteriorating" followed by the Sankey is more effective than walking through every line item.

**Highlight Specific Flows**: Draw attention to the particular flows that support your thesis. "Notice how operating expenses now consume 60% of gross profit" while gesturing to the relevant flow.

**Use Animation or Sequence**: If presenting quarterly trends, show diagrams in sequence. The visual change communicates the trend better than any description.

**Provide Context, Not Data**: The Sankey shows the data. Your job is to explain why it matters. "This margin compression means the company needs 15% revenue growth just to maintain earnings" adds value the diagram alone doesn't provide.

Stakeholder-Specific Approaches

**For Portfolio Managers**: Focus on investment implications. What does this flow pattern mean for expected returns? How does it compare to portfolio positions in similar companies?

**For Investment Committees**: Emphasize risk factors. What concentration risks are visible? How has the business model stability changed? What happens if key flows decline?

**For Clients**: Tell the story simply. "Here's where the money comes from, here's where it goes, and here's what remains. Notice how much reaches the bottom line compared to this competitor."

Common Presentation Mistakes

**Too Many Diagrams**: One or two well-explained diagrams beat a dozen that overwhelm. Be selective.

**Insufficient Explanation**: A Sankey without context is just a pretty picture. Always explain what you want the audience to notice.

**Missing the "So What"**: Every visualization should connect to an actionable insight. What should the audience do with this information?

Advanced Techniques for Daily Workflow

Morning Routine for Coverage Analysts

Analysts covering specific companies benefit from a systematic morning check:

1. **Check filing alerts**: Any 8-Ks or other filings since yesterday?
2. **Generate current Sankey**: If new data available, refresh your visualization
3. **Compare to prior period**: Note any structural changes
4. **Flag for deeper analysis**: Unusual patterns warrant investigation
5. **Update tracking notes**: Document observations for quarterly synthesis

Earnings Season Protocol

Earnings season is intense. Sankify can accelerate your processing:

**Pre-Earnings**

• Generate Sankeys for expected results (using guidance)
• Prepare comparison templates for actual vs. expected
• Note key flows to watch based on management commentary

**Post-Earnings**

• Immediately generate actual results Sankey
• Compare to expectations—where did flows differ?
• Compare to year-ago quarter—what's changed structurally?
• Identify questions for earnings calls or follow-up research

**Synthesis**

• After processing results, update your Sankey library
• Note any companies with significant structural changes
• Flag patterns that appear across multiple companies (sector trends)

Building Your Analysis Library

Over time, build a reference library:

• **Company baselines**: "Normal" Sankey patterns for companies you follow
• **Industry archetypes**: Typical flow patterns for different business models
• **Anomaly examples**: Cases where unusual patterns preceded significant events
• **Presentation templates**: Proven formats for different stakeholder types

This library accelerates future analysis and improves pattern recognition.

Integrating Sankify with Other Tools

Complementing Traditional Analysis

Sankey diagrams don't replace spreadsheets—they enhance them. Use Sankify for:

• **Initial pattern recognition**: Quickly understand a company's structure
• **Anomaly detection**: Spot unusual patterns worth investigating
• **Communication**: Present findings more effectively

Then use spreadsheets for:

• **Detailed calculations**: Precise ratio analysis and modeling
• **Projections**: Financial forecasting and scenario analysis
• **Audit trails**: Documenting your analytical work

Research Report Integration

When writing research reports or investment memos:

1. Include a Sankey diagram early to establish the business structure
2. Reference specific flows when making arguments
3. Use comparative diagrams to illustrate competitive dynamics
4. Add temporal comparisons to demonstrate trends

The visual supports and accelerates reader comprehension.

Common Mistakes to Avoid

Analysis Mistakes

**Ignoring Seasonality**: Comparing Q4 to Q1 without considering seasonal patterns misleads. Always compare like periods.

**Overinterpreting Single Quarters**: One unusual Sankey might be an anomaly. Look for persistent patterns before drawing conclusions.

**Missing Accounting Changes**: Companies sometimes change segment reporting or accounting policies. What looks like a business change might be a presentation change.

Presentation Mistakes

**Information Overload**: Showing every available Sankey diagram overwhelms audiences. Be selective and purposeful.

**Unexplained Visuals**: Never assume the audience interprets diagrams the same way you do. Explain what you see.

**Missing Investment Implications**: Analysis is only valuable if it informs decisions. Always connect observations to actionable insights.

Building Your Expertise

Mastering Sankify-based analysis takes practice. Recommendations for skill development:

**Daily Practice**: Generate Sankeys for companies in the news. Even if you're not actively covering them, the practice builds pattern recognition.

**Historical Study**: Look at historical Sankeys for companies that subsequently experienced significant events. What patterns preceded those events?

**Peer Discussion**: Share observations with colleagues. Different analysts notice different patterns; collective discussion improves everyone's skills.

**Continuous Refinement**: Regularly review your past analyses. Where were you right? Where did you miss something? What patterns should you watch for in the future?

Financial analysis is both art and science. Sankify provides a powerful lens for viewing financial data. Your expertise comes from learning to use that lens effectively. These best practices accelerate that learning—but there's no substitute for putting in the hours with real company data.

The analysts who get the most value from visualization tools are those who use them consistently, systematically, and thoughtfully. Make these practices part of your daily routine, and watch your analytical capabilities compound over time.