Everything to Know about ROE, with Average ROE by Industry Data
“Focus on return on equity, not earnings per share.” –Warren Buffett One of my favorite Buffett quotes of all time. Focusing on the returns on equity, and not earnings, forces us to recognize the company’s performance in managing their capital versus strictly the earnings and nothing else. Buffett likes to compare stock returns to the […]
What is a Good PEG Ratio?
Updated: 4/6/2023 The PEG ratio was one popularized by the famed fund manager Peter Lynch, who went on to post one of the best mutual fund track records of all time. Lynch used the PEG to identify good growth stocks trading at reasonable prices. The formula for the PEG ratio is: PEG = Price to […]
What is Return on Equity and How Do I Calculate it?
Updated 1/5/2024 “Focus on return on equity, not earnings per share.” Warren Buffett In the investing world, there always seems to be a big divide between “value and growth,” deep value (cigar butts) and quality value, and many others. Buffett notes throughout his Shareholder Letters that both sides of the coin can coexist; focusing on […]
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
Updated 6/4/2024 “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, which states that a bird in […]
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
Updated 4/4/2024 Today’s marketplaces and finance industries are changing rapidly. The rise of eCommerce and Fintech disrupts how we buy and sell merchandise, car rides, banking, and groceries. With that rise come new terms that help us determine how profitable these companies are and how to define their pricing power. The take rate has been […]
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?
Updated 1/5/2024 A company’s capital structure and credit health can drive the company forward regarding revenues, earnings, and cash flows. How the company funds 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 company […]
