An often overlooked metric when it comes to stocks is the cash conversion cycle. This metric only applies to companies that carry inventory, such as grocery or apparel, but it is important in measuring a company's efficiency. In this post, we'll explain "What is the Cash Conversion Cycle?" and why it's important, as well as showing some stock performance data for stocks that have a good CCC compared to stocks with a relatively worse CCC.
Looking to invest in Software-as-a-Service (Saas) stocks? A key metric to understand is the rule of 40. In this post, we'll explain what the rule of 40 is, how to incorporate it into your investing approach, and how to find stocks that beat the rule of 40.
On average, the S&P 500 returns about 9-10% a year over the long term. A large amount of money managers and retail investors are unable to beat this return over the long run even though it's not that high of a hurdle to overcome. In this post, we'll outline a passive buy-and-hold strategy that uses ROIC and revenue growth to beat the market. We think this is very simple to understand and implement.
Are you tired of investing into low-quality stocks? Do you have a criteria when it comes to choosing stocks to invest in? Even if you did have a criteria, do you really know what to look for? After reading this post, hopefully you'll be able to tell a good stock from a not-so-good stock. This criteria is largely (but not fully) inspired by the book 100 Baggers by Christopher Mayer.
Here's why buying founder-led stocks can help you outperform the market over the long run.
Investing is tricky. Some investment strategies work really well, while most are no better than a flip of a coin. Learning fundamental analysis - discounted cash flow analysis in particular - is a timeless strategy with long-term success when done correctly.
What is a PEG ratio? The price to earnings to growth ratio, or PEG ratio for short, is an indicator used in fundamental analysis in order to value a stock. It is a decent indicator but it does have a few drawbacks as we'll explain in this post. Keep reading to learn about a better way to use the PEG ratio to find undervalued stocks, in our opinion.
When analyzing a stock you plan to invest in, it is crucial to look at its balance sheet to see its current financial health. A balance sheet shows a snapshot of a company's assets and liabilities at the particular date shown on the balance sheet. It is also referred to as the statement of financial position. To beginners, balance sheets may seem complicated if you don't know what to look for. That's why we are breaking it all down in this post.
Relative valuation is done by simply comparing companies in the same industry by using metrics/ratios such as P/E ratio or P/B ratio. It is one of the most common methods of valuation as it is by far the easiest.
What is it about penny stocks that lures new or young investors? They are volatile, mostly unprofitable and regularly dilute shares in order to raise new capital.
Companies need capital in order to run their operations. Because of this, they raise money either through equity (issuing shares) or through debt financing (bonds/loans). However, raising money isn't free. There is a cost of issuing debt, and a theoretical cost of issuing equity. WACC is a weighted average of cost of debt and equity. It is an important calculation for valuing stocks because a company's WACC is often used as a discount rate for valuation.
If you do some searching for dividend stocks, you may find stocks that have dividend yields of 15% or more. To a beginner investor, stocks like this may seem like a bargain. However, it is often the case that the dividends for these high yielding companies are unsustainable and only high because the price of the stock has dropped due to poor fundamentals. There are a few ways to check if a dividend is safe, and this post will teach you just that.
Would you rather receive $100 one year from now? Or would you want to receive it today? The correct answer of course is today. That's because money loses value over time due to inflation and the opportunity cost of investing it. Well, the point of DCF analysis is to forecast future free cash flows of an investment/company and then discount them back into the present in order to find out what the future money is worth today (present value). If the present value of the future free cash flows are greater than the current cost of the investment, then it is considered a good/undervalued investment.
There’s currently a lot of commotion with regards to the yield curve. With large investors focusing on the inversion of the 2 year and 10 year government bond spreads, it’s worth discussing the importance of this event because the yield curve has been used for decades as a leading indicator of economic outlooks.
When it comes to the stock market, there are generally two types of participants: Investors and speculators. Speculators tend to use technical analysis while investors tend to use fundamental analysis. Which is better? Can you combine both? Learn more here.
Interest rates are something the market is being very attentive to, and rightfully so. The lower the interest rates, the easier it is for businesses to continue their operations, thus having a more fulfilling journey. Investing may become more difficult or much easier, depending on the percentage. It is all within the power of FOMC, or the Federal Open Market Committee.
Understanding what federal reserve interest rates are and how much influence they have on the market will help you understand how investing is affected by these changes.