Part 9 -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. How it all started.
Understanding beats gambling.
80. Net Margin
Net Income/Revenue = How much of each dollar actually ends up in your pocket.
Why does this matter? It's like checking your lemonade stand's real profits after paying for everything - lemons, sugar, permits, and that fancy umbrella. 5% margin? You're keeping a nickel per dollar. 20% margin? Now you're running a premium beverage empire!
81. Market Cap
Shares Outstanding × Share Price = Your company's total price tag (of today).
Why does this matter? It's like sizing up houses in different neighborhoods. Small cap? You're looking at a cozy starter home. Large cap? Welcome to the corporate mansion district where the big players live!
82. Enterprise Value
Market Cap + Debt - Cash = The real cost of buying the whole company. Think of it like buying a house: The purchase price (market cap) is just the start. You'd also take over the mortgage (debt), but you'd get the money in the seller's house-related accounts (cash).
Why does this matter? It's like checking a used car's true cost - not just the sticker price, but including the loan balance minus the cash in the glove compartment. Sometimes that $50K car actually costs $45K, and sometimes it's really $60K!
83. Share Factor
A multiplier that adjusts market cap calculations when you buy international stocks on US exchanges.
Why does this matter? It's like buying European chocolate bars in America - sometimes one American package contains two original European bars inside. If one US-listed share equals two foreign shares, we use a Share Factor of 2. Without this multiplier, you'd think the chocolate company was half its real size! Normal US companies keep it simple with a Share Factor of 1.
84. Trailing PEG (1Y)
P/E Ratio/EPS Growth Rate = Are you overpaying for growth?
Why does this matter? It's like checking if that "high-performance" gym membership is worth it based on your actual muscle gains. Below 1? You're getting a bargain. Above 1? Maybe that growth premium isn't such a deal!
85. P/B Ratio
Price/Book Value Per Share = How much you're paying above liquidation value.
Why does this matter? It's like comparing a company's yard sale value to its retail price. Low ratio? You're buying assets on clearance. High ratio? Better be something special in that corporate attic!
That’s it for the genius series. Tell me if you liked it, and what else do you want me to cover.
What I did
Watched the inauguration of President Trump
What's On My Mind
I’m really curious how the German elections will go.
Nuggets
Started reading Your Money Or Your Life. I like it so far because it has some great perspectives on money and our relationship with it.
Take care,
Michael
Hit the heart if you are positive about the future :-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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