4 Types of Company Growth Rates and How to Calculate Them
Investors demand growth from companies. Wall Street loves growth. But how is company growth defined exactly? In this post we’ll examine 4 separate types of company growth rates, and when they are used depending on the type of company. First, let’s start with the bottom line, or Earnings Per Share. 1—Earnings Per Share Growth Earnings […]
CAPEX vs. OPEX – Learn the Difference and How to Utilize when Investing!
When I am looking to invest in a stock, one major thing that I really like to focus on is the spending that the company has. To effectively evaluate the spending that the company has, you need to be able to compare CAPEX vs. OPEX. I know that might sound tricky, and that’s why I’m […]
Why Do Companies Repurchase Shares? To Create Value.
Some of the greatest CEOs of all-time used lots of share buybacks to create outstanding returns. In many cases, these share repurchases can be fantastic for investors. They work as a savings vehicle, and they spurn growth in share value. But they don’t come without their risks. In this post, we will discuss the pros […]
Investing Implications of Earnings Before Interest and Taxes (EBIT)
“We are trying to look at businesses in terms of what kind of cash can they produce, if we’re buying all of them, or will they produce, if we’re buying part of them.” – Warren Buffett Cash flows remain the lifeblood of every company. And the starting point for those cash flows is earnings before […]
Explaining the Growth Capex Formula with an Easy Example
Updated: 04/06/23 When a company invests in a long-term asset for future cash flows, these are called capital expenditures, or capex. Capex can be divided into two buckets: growth capex and maintenance capex, as suggested by Warren Buffett. Capital Expenditures = Growth Capex + Maintenance Capex These definitions can help distinguish between companies with high […]
How to Tell If Negative Book Value is a Sign of High Risk or Not
A negative book value means that a company has more total liabilities than total assets. The numbers simply say the company owes more than it owns. But just because a company has negative book value, doesn’t mean it’s automatically a bad investment or even a company with a weak balance sheet. We’ll look at a […]
The Two Types of Undervalued Assets to Look For in a Balance Sheet
Because of GAAP accounting rules, assets can be undervalued or even not recorded at all on a company’s balance sheet. This can be a source of great undervalued stock opportunities, if you know what to look for. Of course the term “undervalued” can have many connotations and mean a lot of things to many different […]
“Knowing Your Numbers” Like the Sharks = Understanding Unit Economics
Unit economics – what a boring topic amiright? No – I am not right. And chances are, you also agree that unit economics aren’t boring since you are reading this article. Or maybe you have no idea what they are but you’re here to learn a little bit about them. Either way, you’re in the […]
“Safety 1st” PEG Ratio- An Intelligent Growth Estimate for a Margin of Safety
A big problem for value investors using ratios to evaluate stocks is incorporating growth into the evaluation. Without growth, a stock likely won’t revert to the mean and will probably stay at lower valuations forever (or until it dies). One brilliant way to incorporate growth into value ratios is with the PEG ratio, popularized by […]
What is ARPU and How Does it Affect My Investments?
ARPU is a term that a lot of companies use nowadays to try to breakdown some of their financial reporting ratios on a per user basis, for the simplicity of comparisons. ARPU stands for Average Revenue Per User, which companies can use to try and find the true Lifetime Value (LTV) of a customer. A […]
