Part 8 -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.
Let's dive into even more financial numbers and ratios that'll make you sound smart at the dinner parties (or at least impress your pet during late-night analysis sessions).
71. Gross Margin
(Revenue - Cost of Revenue)/Revenue = The chunk of cash you keep after paying for your products.
Why does this matter? It's like running a lemonade stand - if lemons and sugar cost you 60 cents and you sell for $1, your 40% gross margin means you're not just squeezing lemons, you're squeezing profits!
72. Return on Equity (ROE)
Net Income/Shareholder's Equity = How much bang shareholders get for their invested buck.
Why does this matter? It's like checking if your money is being lazy or doing push-ups. High ROE? Your money's been hitting the gym. Low ROE? It's probably sleeping on the couch.
73. Current Ratio
Current Assets/Current Liabilities = Can we pay our bills without selling the office furniture?
Why does this matter? It's like checking your wallet before ordering that fancy dinner. Below 1.0? Maybe stick to the appetizer menu. Above 2.0? Order the lobster, you're doing fine!
74. FX Rate
The magic number that turns foreign money into good ol' USD.
Why does this matter? It's like having a corporate currency translator. Without it, comparing international companies would be like trying to measure your height with both rulers and measuring tape - chaos!
75. Piotroski F-Score
A 0-9 report card for company financial strength.
Why does this matter? It's like a corporate health checkup score. 8-9? Your company's running marathons - easy. 0-2? Time for some serious financial vitamins and maybe a corporate gym membership. But the score itself doesn’t tell you where the company is thriving or limping. It’s just a quick indicator.
76. Long-term Debt to Equity
Long-term IOUs divided by what we actually own.
Why does this matter? It's like checking how much of your house is mortgaged versus paid off. High ratio? You're basically renting from the bank. Low ratio? You're the boss of your corporate castle!
77. Operating Margin
Operating Income/Revenue = How much we keep after running the daily show.
Why does this matter? It's like seeing how much allowance is left after paying for lunch and bus fare. High margins mean you're not just surviving, you're thriving enough to buy desserts!
78. EPS QoQ Growth
This quarter's earnings per share versus last quarter's.
Why does this matter? It's like tracking your weight loss every three months, but for profits. Growing? Pop the champagne! Shrinking? Time to ask the profit personal trainer for help.
79. P/E Ratio
Stock price divided by earnings per share = How much folks are willing to pay for $1 of earnings.
Why does this matter? It's like the corporate popularity contest. High P/E? Everyone wants to sit at your lunch table. Low P/E? Either you're unpopular or the best-kept secret in the market.
See you next week :-)
What I did
I'm taking TheValueVantage.com to the next level! While my simulations have shown promising results, I believe in backing up potential with proven performance. That's why I've temporarily closed new registrations. As you know I’ve invested my own money to demonstrate real-world results. By the end of November, I'll know more – because nothing speaks louder than hard facts. This hands-on validation phase will help me show future clients exactly what we can deliver.
Dug deeper into the RTOS topic :-)
What's On My Mind
While it wasn't an easy decision to temporarily close TheValueVantage, I believe taking this time to demonstrate real-world performance is in everyone's best interest.
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.
The Economy Rocket is a reader-supported publication. To receive new posts and support my work, consider becoming a subscriber.
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