Part 7 -Fundamentals Aren’t Just Numbers: They’re the Keys to Winning the Stock Game
A Look at the Metrics That Drive Company Share Prices Up (or Down)
I’m Michael and the founder of TheValueVantage.com and on a mission to make beating the stock market as easy for you as choosing your favorite ice cream. Take a look at the Return-Simulator on my website. How it all started.
Understanding beats gambling.
The Income Statement Part 3 & More
Beyond The Basic Metrics
When fundamentals join forces, they tell deeper stories about a company's health. Let's explore these powerful combinations that reveal what's really happening under the hood.
61. Interest Expense
The cost of borrowing money – or "paying for the privilege of using other people's cash." Why does this matter? It's like your company's credit card bill. The higher it goes, the more profits get eaten up by the debt monster. Rising interest expense can turn a profitable company into a corporate couch surfer real quick.
62. Consolidated Income
The total profit/loss after tax that belongs to the whole corporate family.
Why does this matter? It's like a family reunion's potluck dinner result - combining everything from grandma's profitable pie business to cousin Joe's struggling lemonade stand. One number to rule them all, showing how the entire corporate clan performed together.
63. Revenue Per Share (RPS)
Take revenue, divide by shares, and voilà! Why does this matter? It's like knowing how much sales candy each share gets. Think of it as EPS's outgoing cousin who shows off total sales rather than just the profits. "Hey look, each share brought in $100 in sales!" flexes in finance.
64. Return on Assets (ROA)
Net Income divided by Total Assets = How much bang for your asset buck.
Why does this matter? It's like asking your money" What have you done for me lately?" If a company's ROA is 2%, it's generating $2 of profit for every $100 in assets. Well, 2% is not exactly hustler of the year material.
65. Asset Turnover
Revenue divided by assets – or "How hard are we making our assets work?"
Why does this matter? It's like checking if your company's gym equipment is actually being used or just collecting dust.
High turnover = efficient use.
Low turnover = expensive weights.
66. Book Value
Assets minus liabilities = What's left if we sold everything and paid everyone off.
Why does this matter? It's the corporate equivalent of checking your net worth after a shopping spree. "Sure, we bought a lot, but look what we own!"
67. Book Value Per Share (BVPS)
Book value divided by shares – or "What's my slice of the corporate pie worth?"
Why does this matter? It's like finding out how much furniture you'd get in the corporate divorce. Below this price, you're basically buying assets at a garage sale discount.
68. Profit Margin
(Revenue - COGS)/Revenue = How much we keep from every dollar of sales.
Why does this matter? It's the corporate version of checking how much of your paycheck survives after bills.
High margins = living large.
Low margins = living on corporate ramen.
69. Revenue QoQ Growth
This quarter's revenue vs. last quarter's.
Why does this matter? It's like checking if your company's diet is working every three months. Growing? Great! Shrinking? Time for a corporate fitness intervention. But don’t get too hectic, some ups and down are just part of the game.
70. Debt to Equity Ratio
Debt divided by equity – or "How much do we owe vs. own?"
Why does this matter? It's like checking if your company's credit card habit is getting out of hand.
High ratio = "We might need financial therapy."
Low ratio = "We're responsible adults!"
Remember, these metrics are like corporate emojis – they tell a story, but you need the whole conversation for context. Next week: More numbers that'll make your brain pop!
That's it for today.
What I did
Fixed a little logic bug in the return simulator code.
Dug deeper into the RTOS topic :-)
What's On My Mind
Sometimes seemingly boring weeks still lead to progress. Apart from that, nothing fancy this week.
Nuggets
Nothing this week :-)
Take care,
Michael
Hit the heart if you love your routines :-D
Disclaimer:
The information in this article is my personal opinion. I’m not a certified investment professional. It is not consulting, nor does it constitute investment recommendations.
I do my research carefully and follow my personal investment strategy.
The stock market is a complex building with its own rules. There are no rules set in stone, like the rules of physics.
Therefore, use the contents of this newsletter at your own risk and do your own research as well. Investing in the stock market can lead to a total loss of the capital invested.
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