Graham Number: Classic Screener for Defensive Investors
Updated 4/21/2023 Screening for stocks using different metrics remains one of the best ways to search for companies to investigate. For defensive investors, one of the best screeners is the Graham Number. The Graham number equals a formula created from the writings of Graham in “The Intelligent Investor.” Using different methods to estimate the fair […]
How to Evaluate Lifetime Value (LTV) with SaaS Companies
One of the most important metrics for a Software as a Service (SaaS) company is their lifetime value (LTV). This is such an important metric because the concept of Software as a Service is great in theory, but you’re banking on those customers to continually come back and keep renewing their service. So, how do […]
Avoid Value Traps by Understanding Various Valuation Multiples by Industry!
One of the hardest things to do when investing is figure out the proper value for a company. Sure, “buy low, sell high” sounds easy enough, but with differing valuation multiples by industry, it’s not just a blanket process that you can apply to all companies that you look at. When I first started investing, […]
Absolute PE Model – Valuable Tool for Understanding Growth and Valuation
The price we pay for investing in any particular company matters and the continuation of determining the fair value for any company is an ongoing process. Another tool we can add to our toolbox is the absolute PE model created by Vitaliy Katsenelson. In the fantastic book, Active Value Investing, Vitaliy lays out his idea […]
Buffett’s 3 Categories of the Return on Invested Capital Formula
Updated 5/1/2024 “Leaving the question of price aside, the best business to own is one that can employ large amounts of incremental capital over an extended period at very high rates of return.” Warren Buffett, 1992 Berkshire Hathaway Shareholder Letter Return on Invested Capital is a metric I have been thinking about lately. The list […]
Don’t Let Simple Valuation Ratios Muddy the Big Picture
One pitfall that I think is very easy for us investors to fall into is getting blinders on and looking at some simple valuation ratios and making that the most important part of any investment. Honestly, I know that this is something that I struggle with a lot. I am a very analytical person and […]
Don’t Know How to Value a Company? Use These 4 Valuation Ratios
Updated 5/20/2024 One of the hardest things for a new investor is understanding the math of investing and what the different valuation ratios mean. It can be overwhelming, but don’t worry—I’m here to help break it down in a very simple way and will even point you to a tool to get you started on […]
Relative Valuation – Pros and Cons of the MOST Common Form of Valuation
Question for you: Do you know the most common form of valuation of stocks? Not discounted cash flows, dividend discount models, but relative valuation. Never would have guessed? I know I was shocked when I discovered this fact. Most analysts’ reports of the sell-side variety use this type of valuation. Discounted cash flows remain difficult, […]
Is Price to Tangible Book Value Dead? A Full Guide to This Controversial Metric
Warren Buffett and Ben Graham are the leading proponents of value investing. No fundamental analysis metric has a greater correlation to the company’s value than the price-to-book ratio. And, to a great extent, the price-to-tangible book ratio. As value investors, we are more concerned with the value of a company and, more importantly, the book […]
What’s the PEG Ratio in Finance – Does it Work on Large Companies?
Price-to-earnings, or P/E ratio as it is also known, is probably the most recognizable metric used to value stocks. Are they the most useful? Well, for one, they don’t consider any company growth, and no one metric is useful all by itself. We can use them with other metrics. The PEG ratio combines all benefits […]
