Fundamental analysis
Valuation multiples, profitability, leverage — and the traps built into each of them.
11 articles
Corporate liquidity: how it differs from solvencyThe ability to pay now and the ability to repay at all are different properties, and the first kills more often.
How to read analyst researchA target price is not a forecast but a function of assumptions. Read the assumptions, not the conclusion.
How to compare two companies: the order of checksA sequence that stops you settling on the first metric that happens to look favourable.
When multiples stop workingLosses, one-off items, negative equity and industry specifics render the familiar ratios meaningless.
Free cash flow: what is left for the ownerCash from operations minus the investment needed to keep the business running. What can actually be allocated.
Comparing against the sector: why absolute multiple levels are uselessA normal level for a metric is set by the industry, not by a general rule.
Profitability: how much a company earns on what was investedMargin shows the efficiency of sales; return on equity shows the efficiency of shareholders' money.
Leverage: how much debt is too muchNet debt, the ratio to EBITDA, covenants — and why the leverage threshold connects directly to your dividend.
ROE: the headline measure of business quality and its main trapWhy a consistently high ROE signals a competitive advantage, and why a high ROE at a leveraged company signals nothing.
EV/EBITDA: when it is more honest than P/EWhy a multiple with debt in the numerator compares companies more fairly, and where it still fails.
P/E: what it is and why low does not mean cheapHow the multiple is calculated, what its value means, and why the lowest P/E in a sector is usually the most dangerous.