Valuing companies from their financial statements and metrics.
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Where fundamentals meet the market: the periodic reports in which companies reveal their results and their outlook. What an earnings report contains, the crucial truth that the stock reacts to results versus expectations (not absolute numbers), why guidance often matters most, how to read beyond the headline, and the volatility earnings bring.
The qualitative heart of fundamental analysis: what protects a great company's high returns from competition. The concept of the economic moat, why competition erodes excess profits, the five main sources of durable advantage, how to spot a moat in the numbers, and why no moat lasts forever.
A profitable company can still go bust if it cannot pay its debts. How to judge financial health: the difference between liquidity and solvency, the leverage ratios (debt-to-equity, net debt to EBITDA), interest coverage, why debt is a double-edged sword, and the warning signs of a fragile balance sheet.
The two great styles within fundamental analysis. Value investing buys companies cheap relative to their fundamentals; growth investing pays up for rapid future expansion. Their logic, their risks (value traps and growth disappointments), the middle ground of GARP, and why the supposed divide is less rigid than it seems.
Beyond the P/E: the toolkit of multiples investors use to judge whether a company is cheap or dear. Price-to-book, price-to-sales, EV/EBITDA, the PEG ratio and dividend yield — what each measures, when it shines, when it misleads, and why no single ratio is enough.
Margins show profit per sale; return ratios show profit per dollar of capital — the deeper measure of business quality. Return on equity, assets and invested capital, the DuPont breakdown that reveals whether a high ROE is quality or debt, and why returns above the cost of capital are what create value.
The financial statement that shows what a company owns and owes at a moment in time. The accounting equation, the three parts (assets, liabilities, equity), what the balance sheet reveals about liquidity and debt, book value, and the warning signs a careful investor watches for.
The statement that tracks real cash, not accounting profit — and often the most honest of the three. Why profit and cash differ, the three sections (operating, investing, financing), free cash flow, and how comparing cash to reported earnings exposes the quality, or the fragility, of a business.
The financial statement that shows whether a company makes money. How revenue flows down through costs to profit, the three margins (gross, operating, net), earnings per share, what the numbers reveal about a business, and the trends that matter more than any single figure.
The most widely used valuation measure: how much you pay for each dollar of a company's earnings. What the P/E ratio means, trailing versus forward, why a high or low P/E is not simply 'expensive' or 'cheap', the role of growth expectations, the earnings yield, and the traps that make P/E misleading.