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 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:

{
  "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:

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

4. Interpret Results

See 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

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.

Financial Metrics Analysis Skill

Analyze year-over-year growth in income statement items including Revenue, COGS, Gross Profit, Operating Income, and Net Income using the Octagon MCP server.

Installation

npx skills add OctagonAI/skills --skill financial-metrics-analysis

<details> <summary>bun</summary>

bunx skills add OctagonAI/skills --skill financial-metrics-analysis

</details>

<details> <summary>pnpm</summary>

pnpm dlx skills add OctagonAI/skills --skill financial-metrics-analysis

</details>

What This Skill Does

This skill analyzes key income statement growth metrics:

• Revenue growth YoY
• Cost of goods sold trends
• Gross profit growth
• Operating income trends
• Net income growth rates

Example Usage

Retrieve YoY growth in key income-statement items for NVDA, limited to 5 records

---

Octagon MCP Setup

This skill requires the Octagon MCP server to be configured in your AI agent.

Get Your API Key

1. Sign up at Octagon 2. Navigate to API Keys from the left menu 3. Generate and save your API key

Configure Cursor

1. Open Cursor Settings → Features > MCP Servers 2. Click + Add New MCP Server 3. Enter:

• Name: octagon-mcp
• Type: command
• Command: env OCTAGON_API_KEY=<your-api-key> npx -y octagon-mcp

Windows: cmd /c "set OCTAGON_API_KEY=<your-api-key> && npx -y octagon-mcp"

Configure Claude Desktop

Add to claude_desktop_config.json:

{
  "mcpServers": {
    "octagon-mcp-server": {
      "command": "npx",
      "args": ["-y", "octagon-mcp@latest"],
      "env": {
        "OCTAGON_API_KEY": "YOUR_API_KEY_HERE"
      }
    }
  }
}

Documentation

• Octagon Docs
• Octagon MCP GitHub

Interpreting Financial Metrics Results

Reading the Output Table

The octagon-agent returns YoY growth data in tabular format:

Positive percentages = Growth compared to prior year Negative percentages = Decline compared to prior year

Key Patterns to Identify

1. Operating Leverage (Positive Signal)

When Operating Income Growth > Revenue Growth:

• Fixed costs spread over larger revenue base
• Scalable business model
• Example: Revenue +5%, Operating Income +12%

2. Margin Expansion (Positive Signal)

When Gross Profit Growth > Revenue Growth:

• Pricing power or cost efficiencies
• Strong competitive position
• Example: Revenue +3%, Gross Profit +6%

3. Margin Compression (Warning Signal)

When Cost of Revenue Growth > Revenue Growth:

• Rising input costs not passed to customers
• Competitive pressure on pricing
• Example: Revenue +2%, Cost of Revenue +5%

4. Profitability Acceleration (Strong Signal)

When Net Income Growth > Operating Income Growth > Revenue Growth:

• All metrics improving simultaneously
• Indicates strong execution
• Example: Revenue +4%, Operating +8%, Net Income +12%

5. Revenue Deceleration (Watch Signal)

When Revenue Growth is declining year-over-year:

• 2024: +10%, 2023: +15%, 2022: +22%
• May indicate market saturation
• Compare to industry growth rates

Trend Analysis Framework

Multi-Year Consistency

Look for companies with:

• 3+ consecutive years of positive Revenue Growth
• Stable or improving Operating Income Growth
• Net Income Growth matching or exceeding Revenue Growth

Inflection Points

Identify when metrics switch from negative to positive:

• Signals potential turnaround
• Confirm with qualitative analysis (earnings calls, management commentary)

Cyclical vs Structural

Distinguish between:

• Cyclical decline: Industry-wide, temporary
• Structural decline: Company-specific, potentially permanent

Comparative Analysis

Peer Comparison

Request peer data using additional queries:

Retrieve year-over-year growth in key income-statement items for <PEER_TICKER>, limited to 5 records and filtered by period FY.

Compare:

• Is Revenue Growth above or below peers?
• Are margins expanding faster than competitors?
• Is Net Income Growth outpacing the sector?

Industry Benchmarks

General benchmarks by sector:

Red Flags

1. Revenue declining, Net Income rising: Unsustainable cost cuts 2. All metrics negative for 2+ years: Structural issues 3. Volatile swings: Inconsistent execution or accounting concerns 4. Gross Profit growing slower than Cost of Revenue: Pricing power erosion

Next Steps After Analysis

1. Deep dive on outliers: Use octagon-agent to query earnings call transcripts for explanation 2. Validate with filings: Request 10-K/10-Q analysis for context 3. Peer comparison: Run same analysis on 2-3 direct competitors 4. Forward estimates: Query for analyst estimates and guidance

Octagon MCP Setup

Get Your Octagon API Key

1. Sign up for a free account at Octagon 2. After logging in, from left menu, navigate to API Keys 3. Generate a new API key 4. Save the key securely - you'll need it for configuration

Prerequisites

Before installing or running Octagon MCP, you need to have npx (which comes with Node.js and npm) installed on your system.

Mac (macOS)

1. Install Homebrew (if you don't have it):

   /bin/bash -c "$(curl -fsSL https://raw.githubusercontent.com/Homebrew/install/HEAD/install.sh)"

2. Install Node.js (includes npm and npx):

   brew install node

3. Verify installation:

   node -v
   npm -v
   npx -v

Windows

1. Download the Node.js installer:

• Go to https://nodejs.org/ and download the LTS version for Windows.

2. Run the installer and follow the prompts. This will install Node.js, npm, and npx. 3. Verify installation: Open Command Prompt and run:

   node -v
   npm -v
   npx -v

If you see version numbers for all three, you are ready to proceed.

Configure Cursor

1. Open Cursor Settings 2. Go to Features > MCP Servers 3. Click + Add New MCP Server 4. Enter:

• Name: octagon-mcp
• Type: command
• Command: env OCTAGON_API_KEY=<your-api-key> npx -y octagon-mcp

Replace <your-api-key> with your actual Octagon API key.

Windows users: Use this command format instead:

cmd /c "set OCTAGON_API_KEY=<your-api-key> && npx -y octagon-mcp"

After adding, refresh the MCP server list to see the new tools. The Composer Agent will automatically use Octagon MCP when appropriate. Access the Composer via Command+L (Mac), select "Agent" next to the submit button, and enter your query.

Configure Claude Desktop

1. Open Claude Desktop 2. Go to Settings > Developer > Edit Config 3. Add the following to your claude_desktop_config.json:

{
  "mcpServers": {
    "octagon-mcp-server": {
      "command": "npx",
      "args": ["-y", "octagon-mcp@latest"],
      "env": {
        "OCTAGON_API_KEY": "YOUR_API_KEY_HERE"
      }
    }
  }
}

4. Restart Claude for the changes to take effect

Configure Windsurf

Add this to your ./codeium/windsurf/model_config.json:

{
  "mcpServers": {
    "octagon-mcp-server": {
      "command": "npx",
      "args": ["-y", "octagon-mcp@latest"],
      "env": {
        "OCTAGON_API_KEY": "YOUR_API_KEY_HERE"
      }
    }
  }
}

Verify Setup

1. Refresh the MCP server list 2. The octagon-agent tool should appear in available tools 3. Test with a simple query:

   Retrieve the current stock price for AAPL

Available Tools

Troubleshooting

API Key Issues: Verify the key is correctly set in the command string with no extra spaces.

Connection Issues: Ensure you have internet connectivity and the Octagon API is accessible.

Rate Limiting: Reduce query frequency if encountering rate limit errors.

Documentation

Full documentation: https://docs.octagonagents.com