The 10-Minute Test
Does the firm Pass a Minimum Quality Hurdle ?
Avoiding the junk that litters the investment landscape in the first step in our 10-minute test. Companies with miniscule market cap are the first to rule out.
Recent IPO are usually not worth your time. Companies sell shares to public only when they think they are getting a high price, so IPOs are rarely bargaings.
Moveover, most IPOs are young, unseasoned firms with short track records. The big exception of this rule is firms that are spun off from larger parent companies. Spinoffs are often solid companines with long operating histories and larger histories that the larger firm no longer wants to manage, and the stocks can often be attractively valued as well.
Has the Company Ever Made an Operating Profit ?
Very often, companies that are still in the money-losing stage sound most exciting. They usually have a single product or a service.
Does the Company Generate Consistent Cash Flow from Operations ?
Fast-growing firms can sometimes report profits
Are Returns on Equity Consistently above 10 percent, with Reasonable Leverage ?
Is Earnings Growth Consistent or Erattic ?
Beast companies post reasonably consistent growth rates. If a firm's earnings bounce all over the place, it's either extremely volatile indistry or it's regularly getting shellacked by competitors.
How Clean is the Balance Sheet ?
Does the Firm Generate Free Cash Flow ?
How Much "Other" is There ?
Has the Number of Shares Outstanding Increased Markedly over Past Several Years ?
Does the firm Pass a Minimum Quality Hurdle ?
Avoiding the junk that litters the investment landscape in the first step in our 10-minute test. Companies with miniscule market cap are the first to rule out.
Recent IPO are usually not worth your time. Companies sell shares to public only when they think they are getting a high price, so IPOs are rarely bargaings.
Moveover, most IPOs are young, unseasoned firms with short track records. The big exception of this rule is firms that are spun off from larger parent companies. Spinoffs are often solid companines with long operating histories and larger histories that the larger firm no longer wants to manage, and the stocks can often be attractively valued as well.
Has the Company Ever Made an Operating Profit ?
Very often, companies that are still in the money-losing stage sound most exciting. They usually have a single product or a service.
Does the Company Generate Consistent Cash Flow from Operations ?
Fast-growing firms can sometimes report profits
Are Returns on Equity Consistently above 10 percent, with Reasonable Leverage ?
Is Earnings Growth Consistent or Erattic ?
Beast companies post reasonably consistent growth rates. If a firm's earnings bounce all over the place, it's either extremely volatile indistry or it's regularly getting shellacked by competitors.
How Clean is the Balance Sheet ?
Does the Firm Generate Free Cash Flow ?
How Much "Other" is There ?
Has the Number of Shares Outstanding Increased Markedly over Past Several Years ?