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- Does the company retain earnings?
- Are retained earnings increasing?
- Does the company consistently achieve high returns on capital?
- Does the company have a durable moat?
- What are the moat sources?
- Do customers have to keep buying the product or service?
- How is the company culture?
- Is the company obsessed with customer satisfaction?
- Quality of customer service?
- Quality of company in employee, vendor and customer eyes?
- Does the company occupy the economic high ground?
- Does the company satisfy basic human needs of its customers?
- Is the company in a boring, no-growth industry?
- Does the company rely on innovation?
- Is the company cyclical?
- How did the company’s finances behave during financial crisis and recessions?
- How is the competitive landscape?
- Who are the competitors? Read their financial reports.
- How are the competitors performing?
- Can the company charge premium prices?
- Is the company the market leader?
- Does the company have the best sales force in the industry?
- Are companies in the same industry generally profitable?
- Does the company have a very long operating history? 100 years?
- Will the company be much larger 10 years from now (destination analysis)?
- Does the company have plenty of room to grow?
- What are the value drivers?
- What’s the current size compared to total addressable market?
- Sources, quality and sustainability of growth?
- Where in the business cycle is the company?
- How is the company growing? Increasing sales of existing product, repeat customers, new products, acquisitions?
- Does the company have a track record for successful pivoting, expansion, entering new markets?
- Do customers need to keep buying the product?
- Can the company spin off businesses and unlock value?
- Is the company run by capable management with a great track record?
- Management integrity?
- Does management keep promises and deliver on what they stated they would do?
- Founder CEO?
- Does management have a high percentage of shares?
- Is management incentivization aligned with shareholder interest?
- Does the company buy back its own shares?
- Does the company acquire other businesses?
- Does the company pay dividends?
- How does the company create shareholder value?
Personal Analysis Capability
- Is the company’s business within my circle of competence?
- Do I have personal experience with the product or service?
- Is the annual report short?
- Is the business model simple and easy to understand?
- Is the reporting simple, or complex and convoluted?
Bear Case – What Could Go Wrong?
- Regulatory risk?
- Delisting risk?
- Future obsolescence?
- Cheaper substitute product/service?
- Are the earnings predictable?
- Time series and cross-sectional analysis
- Vertical and horizontal analysis
- Is P/E suitable for valuation?
- Does the company derive a big part of its value from intangibles that get expensed instead of recorded on the balance sheet?
- Are P/E, P/FCF, and P/S lower compared to previous years?
- Do I need Excel to figure out whether the current share price is very cheap, or is it pretty obvious?
- Did a negative event result in a temporary price drop, but the long-term business outlook isn’t affected?