How Multifactor Models Can Produce Excess Returns in the Stock Market
If you recently read my post about the different value factors then you’re in the right place to take that knowledge and build on it with some multifactor model discussion from Chapter 16 of ‘What Works on Wall Street’, written by James O’Shaughnessy. If you haven’t yet read that article, then I highly recommend you […]
What are Value Factors, and Which Are Considered the Best?
Value Factors – what the heck are they? In the book ‘What Works on Wall Street’ by James O’Shaughnessy, he has an entire chapter (Chapter 10 – you should read it!) dedicated to the ‘Value of Value Factors’ so let’s dive in! Value Factors are where you’re looking for different factors that might identify a […]
Sample Earnings Per Share Analysis on the FANG Stocks
An Earnings Per Share analysis is one of the most common ways that investors will attempt to evaluate a stock. My goal for this post is to make you THE Earnings Per Share expert so that you can run your own Earnings Per Share Analysis. Earnings Per Share, or EPS, is a very easy ratio […]
Instead of using YOY Growth for Stocks, use averages. Here’s the big reason why.
YoY growth is a very popular metric on Wall Street. The term YoY means year over year, and it’s the difference in a company’s financials between one year and the next. It’s often used to evaluate growth of revenues, earnings, cash flows and/or book value. If you’re not 100% of each of those accounting terms, […]
How Negative Growth Calculations Can Actually Mislead Investors
Updated – 12/14/23 Earnings growth is the life blood of Wall Street. You see this with the obsession of earnings season and analyst projections. But these calculations can trip up beginner investors, especially when growth is negative. The calculation for negative growth can be confusing. Sometimes it’s straightforward, sometimes not. So it’s extremely important to […]
Mastering the Valuation of Shares in Stocks by Combining Ratios
Trying to determine a reasonable valuation of shares for a stock you are considering can be equated, in some ways, with the way and strategies many people use when they go hunting. I had my first hunting experience back in early 2017 with a friend who was a seasoned hunting enthusiast. I found that the […]
ROE is a Valuable Metric but it Ignores The Debt Effect in its Calculation
A return on any investment refers to the return of capital achieved over a certain period of time. In financial statement analysis, we are using many different ratios to understand how effectively a company is using its assets or its resources to generate a profit and create value for its shareholders. Yet, some of the […]
Analyzing Greenblatt’s Magic Formula Strategy without Backtesting
It seems that every argument supporting Joel Greenblatt’s magic formula examines some flavor of a backtest to prove its effectiveness. The problem with backtests is that the results don’t tell the complete picture. Backtests are fundamentally flawed, so we should find other ways to validate or disprove the magic formula strategy. Backtests are dangerous indicators […]
Balance Sheet Debate: Tangible vs Intangible Assets– Which is Better?
There are two important sub-metrics for investors to understand on a balance sheet: tangible and intangible assets. Adding these up will sum to a company’s total assets. The question here is twofold. Does it matter much if a high number of assets on a balance sheet come from tangible vs intangible assets? And is one […]
Return on Total Assets (ROTA): How Capital Efficient is This Company?
Return on Total Assets (ROTA) is one of the key metrics of a firm’s operating performance. The ratio takes into account the assets that the company uses to support its core operations and compares them to the net income that it generates by using these assets. Hence, a high ROTA ratio implies that the company […]
