6 Examples of Negative Earnings Leading to Bankruptcy in the Stock Market
I’ve had the controversial take that investors should avoid stocks with negative earnings. This is because my research into the biggest bankruptcies of the 21st Century showed that negative earnings was the #1 most common characteristic of companies in the year before bankruptcy. The following are snippets from my book Value Trap Indicator, which examined […]
Graham Formula: Taking a Look at the Way Benjamin Graham Values Stocks
“Using precise numbers is, in fact, foolish; working with a range of possibilities is a better approach.” Warren Buffett Warren Buffett shares much of his investing wisdom in his annual letters to shareholders, including his thoughts on calculating intrinsic value. His favorite analogy is the Aesop fable that a bird in the hand is worth […]
The Price to Sales (P/S) Ratio Formula Explained
Price to Sales (“P/S”) is one of the more common and simple relative valuation ratios used to generally compare how expensive or cheap a stock is compared to its peers. The price to sales ratio formula itself is simple, it is Price (Market Cap) divided by Sales (Revenue). The reason we use Market Capitalization for […]
Take Rate: Its Importance in the eCommerce and Fintech Industries
Today’s marketplaces and finance industries are changing at a rapid pace. The rise of eCommerce and Fintech disrupts how we buy and sell merchandise, car rides, banking, and groceries. With that rise comes new terms that help us determine how profitable these companies are, plus how to define their pricing power. The take rate has […]
How to Use Net Tangible Assets from a Company’s Balance Sheet
Net tangible assets can be a very useful metric for evaluating a company’s future profitability, especially in capital intensive industries. In this blog post, I’ll explain the basics behind net tangible assets and include a few easy and practical metrics for it. We’ll break it up into these simple parts [Click to Skip Ahead]: What […]
Beginner’s Guide: What is the P/B Ratio in the Stock Market?
The P/B, or Price to Book Value Ratio, compares a company’s book value with its price in the stock market. Book Value, also called Shareholders’ Equity, is simply a company’s assets minus their liabilities. Book value is not usually explicitly referred to in a company’s financial statements, but is commonly known as another term for […]
What is Capital Structure and How is it Related to Credit Health?
A company’s capital structure, combined with credit health, can drive the company forward regarding revenues, earnings, and cash flows. How the company chooses to fund growth goes a long way toward ultimate success. When investors search for investment quality, starting with the story, a balance sheet tells investors about the capital structure and how the […]
What is a Good P/E Ratio?
The Price to Earnings, or P/E ratio, is one of the most basic ways to try and figure out if a stock is generally cheap. The logic behind the P/E ratio is quite simple. The equation for the P/E ratio is simply Price / Earnings. A low P/E is generally considered better than a high […]
Negative PEG Ratio Implications: What Does It Mean? Why Does It Happen?
The implications for a negative PEG ratio might not be as bad as you think. It all depends on the reason behind the negative PEG ratio, which breaks into 2 possibilities. One spells trouble while the other might not. I’m writing this post as a response to an email I received from a reader. If […]
Trailing Twelve Months (TTM): Why It’s Used and How to Use It
When valuing a company, the number one imperative, use the most up-to-date numbers we can find. Numbers such as prices constantly update in the markets. But the accounting inputs we use come from accounting statements such as the income statement, and those don’t update on a constant basis. So what is the answer? The challenge […]
