Compounding Quality
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10 Crucial Investing Ratios1️⃣ Gross margin (GM) 🎯 What? Company's gross profit compared to its revenue 💡 Formula?Sales - COGS / Sales 2️⃣ EBIT Margin 🎯What?What percentage of sales remains as profit before tax and interest 💡 Formula?EBIT / Sales 3️⃣ Debt-to-Assets 🎯What?The total amount of debt a company has relative to its assets 💡 Formula?Debt / Assets 4️⃣ Debt-to-Equity🎯What?Ratio used to calculate a company's financial leverage 💡Formula?Debt / Equity 5️⃣ CAPEX/Sales 🎯What?Measures the capital intensity of a company 💡 Formula?Capital Expenditures / Sales 6️⃣ Return On Equity (ROE) 🎯What?Indicates how profitable a company is in relation to its equity 💡 Formula?Net Income / Equity 7️⃣ Return On Invested Capital (ROIC) 🎯What?Shows you how efficiently a company is allocating capital 💡 Formula?NOPAT / Total Inv. Capital 8️⃣ Earnings Per Share (EPS) 🎯What?How much money a company makes for each share outstanding 💡 Formula?Net Income / Shares Outstanding 9️⃣ Free Cash Flow Realization 🎯What?Measures how much earnings are translated into free cash flow 💡 Formula?Free Cash Flow / Net Income 🔟 Price-to-Earnings Ratio (P/E) 🎯What?Ratio that compares a company's share price to its earnings per share 💡Formula?Price Per Share / Earnings Per Share Which ratio would you add? 📚If you enjoyed this piece, please hit the “Like” button. Thank you for your support!__💡Download my free investing e-book here: https://lnkd.in/e-nD57RA
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Pieter Slegers
Compounding Quality | Investment newsletter with more than 210,000 subscribers
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Return On Invested Capital is my favorite ratio:
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Kris Heyndrikx
Searching for 10x stocks over 10 years. 125K+ followers across platforms. Potential Multibaggers, Best Anchor Stocks (quality investing) and Multibagger Nuggets
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These are crucial for investors!
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Vincent Blanchard
Helping people and companies grow with the #1 CRM Platform at Salesforce #Machine Learning #IA
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J'adore cette page William Néault
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Compounding Quality
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1,000+ KPIsEvery company can use these KPisSalesBusiness Development TeamChannel Sales TeamCustomer Success TeamInside Sales TeamKey Account Management TeamOutside Sales TeamSales Development TeamSales Enablement TeamSales Operations TeamSales Training and Coaching TeamData Big Data TeamBusiness Intelligence TeamData Analytics TeamData Engineering TeamData Governance TeamData Quality TeamData Science TeamData Security TeamData Visualization TeamDatabase Administration TeamFinanceAccounts PayableAccounts ReceivableCredit and CollectionsFinancial Planning & AnalysisFinancial SystemsInternal AuditInvestor RelationsRisk ManagementTaxTreasuryMarketingAdvertisingAnalyticsBrand ManagementChannel MarketingCreative ServicesDigital MarketingEvent MarketingMarket ResearchOverall Marketing DepartmentProduct MarketingPublic RelationsGeneral CounselContracts and Commercial Law GroupCorporate Governance and Compliance GroupEmployment Law GroupEthics and Risk Management GroupIntellectual Property GroupInternational Law GroupLitigation and Dispute Resolution GroupMergers and Acquisitions GroupReal Estate and Environmental Law GroupRegulatory and Government Affairs GroupHuman ResourcesCompensation and BenefitsDiversity, Equity, and Inclusion (DEI)Employee RelationsHealth and WellnessHR Analytics/Data ManagementHR Information Systems/TechnologyHR Operations/AdministrationLearning and Development/TrainingPerformance ManagementTalent Acquisition/RecruitingInformation TechnologyApplication Development and MaintenanceData Management and AnalyticsEnterprise ArchitectureInformation SecurityIT Governance and ComplianceIT Service ManagementNetworkingSoftware Engineering and Quality AssuranceSystem AdministrationUser Support and TrainingOperations Business Process ManagementContinuous Improvement/Lean Six SigmaCustomer serviceEngineeringFacilities ManagementHealth and SafetyManufacturing/ProductionProcurementProject ManagementQuality Assurance/ControlProduct AnalyticsCustomer SupportProduct DevelopmentProduct ManagementProduct MarketingQuality Assurance (QA)Technical WritingUser Experience (UX) DesignUser ResearchResearch and Development (R&D)AnalyticsDevelopmentEngineeringIntellectual PropertyProduct ManagementProject ManagementPrototype & TestingQuality AssuranceResearchTechnical Writing & DocumentationSupply Chain BuyingInventory ManagementLogistics/TransportationProduction Planning and SchedulingQuality Control/AssuranceStrategic SourcingSupplier Relationship ManagementSustainability and Corporate Social ResponsibilityWarehousing/DistributionCredit:Will Bachman📚 Grab the PDF in high resolution here:https://lnkd.in/eJ8H9psn
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Financial Modeling 101What's a financial model?A financial model is like a big calculator that helps businesses and individuals plan and make decisions about money. It's a tool that uses numbers to show how things might turn out in the future.Here's what you'll learn:• Basic Guidelines for Financial Models• Revenue and Customer Acquisition Models• Cost of Goods Sold (COGS)• Personnel Costs (SG&A Expenses Part 1)• Other Overhead Expenses (SG&A Expenses Part 2)• Nonoperating Expenses• Common Financial Modeling Mistakes• Balance Sheet• Brief Digression on Cash Flow• Cash Flow Statement• Advanced Modeling Techniques• Expense Checklist Source: Dave Lishego📚 Grab the PDF in high resolution here:https://lnkd.in/dstKKajZ
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I struggled reading annual reportsYou know what was a game changer?The 6-step framework from Aswath DamodaranYou can steal it here: Have clear goalsAlways know why you are reading an annual report. What's your purpose?Here are 5 essential things:- Cash Flows- Investments in Future Growth- Operational Efficiency- Quality of Earnings- Risk1️⃣ Cash Flows- How much revenue is translated into cash flow?- How much capital does the company need to generate these cash flows?Free Cash Flow per share growth is one of the main drivers for stock prices.2️⃣ Investments in Future Growth- How much growth is generated by increased productivity?- How much growth CAPEX does the company use?3️⃣ Operational Efficiency- How efficiently does the company allocate capital?- Does management put a lot of emphasis on operational efficiency?The better the capital allocation skills of management, the better for you as an investor.4️⃣ Quality of EarningsNot all earnings are created equalLook for:- Amount reinvested- Return on invested capital (ROIC)5️⃣ RiskThere are two primary concerns regarding risk:- Operational risk involves issues related to the core business activities of the company.- Financing risk pertains to challenges associated with the company's funding methods.Now you know what you're looking for and why, you can start using Damodaran's 6-step approach.Step 1:Confirm the timing and currency- What period is covered?- What currency are they reporting in?Step 2:Map the business mix:- In which segment does the company operates?- What does the geographic breakdown look like? Step 3:Find the base inputs for valuationFrom the Balance Sheet:• How much debt the company have?• Does the company have more current assets and current liabilities?• Does the company have a lot of goodwill on its balance sheet ImageFrom the Income Statement• Are revenues steadily increasing over time?• Does the company need a lot of COGS to sell its products?• How much revenue is translated into net income? From the Cash Flow Statement• Are most earnings translated into operating cash flow?• Does the company have a positive free cash flow (operating cash flow – CAPEX)?• Did the company manage to increase its cash position compared to last year?Step 4:Keep diggingIn the footnotes look for:- Does the company use a lot of SBCs?- When does the company's debt mature?- ...Step 5:Confirm The Units- How many shares outstanding does the company have?- Does the company have preferred shares?- Are acquisitions paid with stocks?Step 6:Corporate Governance- Do insiders get special priveleges?- Does management have a lot of skin in the game? __📚 You liked this? Grab my Financial Analysis Course for free:https://lnkd.in/ewnHQ_Sw
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I struggled reading annual reportsYou know what was a game changer?The 6-step framework from Aswath DamodaranYou can steal it here: Have clear goalsAlways know why you are reading an annual report. What's your purpose?Here are 5 essential things:- Cash Flows- Investments in Future Growth- Operational Efficiency- Quality of Earnings- Risk1️⃣ Cash Flows- How much revenue is translated into cash flow?- How much capital does the company need to generate these cash flows?Free Cash Flow per share growth is one of the main drivers for stock prices.2️⃣ Investments in Future Growth- How much growth is generated by increased productivity?- How much growth CAPEX does the company use?3️⃣ Operational Efficiency- How efficiently does the company allocate capital?- Does management put a lot of emphasis on operational efficiency?The better the capital allocation skills of management, the better for you as an investor.4️⃣ Quality of EarningsNot all earnings are created equalLook for:- Amount reinvested- Return on invested capital (ROIC)5️⃣ RiskThere are two primary concerns regarding risk:- Operational risk involves issues related to the core business activities of the company.- Financing risk pertains to challenges associated with the company's funding methods.Now you know what you're looking for and why, you can start using Damodaran's 6-step approach.Step 1:Confirm the timing and currency- What period is covered?- What currency are they reporting in?Step 2:Map the business mix:- In which segment does the company operates?- What does the geographic breakdown look like? Step 3:Find the base inputs for valuationFrom the Balance Sheet:• How much debt the company have?• Does the company have more current assets and current liabilities?• Does the company have a lot of goodwill on its balance sheet ImageFrom the Income Statement• Are revenues steadily increasing over time?• Does the company need a lot of COGS to sell its products?• How much revenue is translated into net income? From the Cash Flow Statement• Are most earnings translated into operating cash flow?• Does the company have a positive free cash flow (operating cash flow – CAPEX)?• Did the company manage to increase its cash position compared to last year?Step 4:Keep diggingIn the footnotes look for:- Does the company use a lot of SBCs?- When does the company's debt mature?- ...Step 5:Confirm The Units- How many shares outstanding does the company have?- Does the company have preferred shares?- Are acquisitions paid with stocks?Step 6:Corporate Governance- Do insiders get special priveleges?- Does management have a lot of skin in the game? __📚 You liked this? Sign up to my newsletter and receive a course which helps you to analyze Financial Statements like a professional:https://lnkd.in/ewnHQ_Sw
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