Fundamental analysis
Valuation multiples, profitability, leverage — and the traps built into each of them.
20 articles
Cost of risk: what loan-loss provisions take away from net interest marginCost of risk is the amount a bank sets aside in provisions for credit losses, expressed as an annualised percentage of its loan book.6 min
ARPU: who counts as a user, and why the debate is about the denominatorARPU is a service's revenue for a period divided by the average number of users over the same period.5 min
Netback in oil production: what a company keeps from each barrel after logistics and taxesNetback is the price of a barrel worked back to the point where the company produced it.5 min
AISC versus cost of sales: why depreciation comes out and capex goes inAISC (all-in sustaining costs) is the cash cost of sustaining production at its current level, expressed per ounce of gold sold.5 min
Churn: how customer attrition translates into revenue lifetime and valuationChurn is the share of its customer base or recurring revenue that a company loses over a period.5 min
The Piotroski F-score: which financial-statement signals add up to the scoreThe F-score is a financial-statement checklist that awards a point for every condition met, and the total tells you not how much a stock is worth but whether the business behind it is improving.5 min
RWA: how a bank turns its asset portfolio into a capital requirementRisk-weighted assets (RWA) are the sum of a bank's on-balance-sheet and off-balance-sheet exposures, with each position multiplied by a weight that reflects how risky it is.5 min
Pecking order theory: why retained earnings come before debt, and shares come lastPecking order theory holds that a company does not target an "optimal" share of debt but works its way down a ladder of funding sources from the top.5 min
LFL sales: why revenue growth and like-for-like growth are different newsLike-for-like (LFL) sales are the revenue of only those outlets that were trading both in the reporting period and in the comparable period of the previous year.5 min
Factoring: What You Assign to the Factor and Who Pays for Deferred PaymentFactoring is financing against the assignment of a monetary claim: a supplier has shipped goods on deferred payment terms but, instead of waiting for the buyer to pay, sells that claim to a factor and is paid at once, while the factor in return gains the right to collect the debt from the buyer and keeps a fee for the waiting period5 min
EVA: a profit on the books, but no value created — where the line runsEconomic value added (EVA) is a company's profit after a charge for all the capital it uses, equity included, has been deducted.5 min
Net interest margin of a bank: where the spread comes from and what narrows itNet interest margin (NIM) is a bank's net interest income divided by its average interest-earning (performing) assets over the same period.5 min
The Modigliani–Miller Theorem: Why the Share of Debt Does Not Create Value by ItselfThe Modigliani–Miller theorem states that in a world with no taxes, no bankruptcy costs and equal access to borrowed money for all participants, a company's value is determined by its operating assets, not by the proportion in which those assets are financed with debt and equity.6 min
DCF: which cash flows you discount and why the terminal value decides everythingA DCF model values a company not by its market price but by the cash the business is able to hand over to its providers of capital across its entire working life: every future flow is cut by a factor that grows harsher the further away the year lies and the higher the required return.5 min
LTV and CAC: How Customer Payback Turns into Company ValueLTV is the discounted margin a company expects to earn from a customer for as long as that customer stays; CAC is the full cost of acquiring that customer, including sales salaries and the first-period discount.5 min
Fundamental analysis: from a line in the report to the price, and where that link breaksFundamental analysis answers the question of how much a business earns and how much the exchange asks for those earnings; it does not answer the question of when the price will arrive at the resulting valuation.5 min
CIR: what counts as costs, what counts as income, and why the denominator is the more contested partThe cost-to-income ratio (CIR) is a bank's operating expenses divided by its operating income before provisions.6 min
Sum-of-the-parts valuation: how to break a holding company into segments without paying twiceSum-of-the-parts valuation (SOTP) is a way of valuing a company not as a whole but piece by piece: each business inside the group is valued separately by the method that suits it, the results are added up, and then everything that belongs to the group as such is deducted from the total — net debt5 min
EV/EBITDA: why the numerator is the price of the whole business, not market capitalisationEV/EBITDA is calculated as a fraction: the numerator is the price of the business as a whole (EV, enterprise value), the denominator is EBITDA for a comparable period.5 min
CAPM: how beta turns the market risk premium into a discount rateCAPM answers one practical question: what return a shareholder is entitled to demand if they agree to bear only the risk that diversification cannot remove.5 min