Posts by Andrew Stotz
VMC: Mistake #8: Choosing an Unreasonable Cost of Equity
A very common error that I’ve seen made by analysts is discounting the future cash flows of a business at an unreasonable cost of equity (COE)—which is why it’s valuation mistake #8. Analysts are notorious for trying to manipulate their COE to get the outcome in valuation that they want.
Read MoreVMC: 9 Steps to Prepping for the CFA Exams
Many financially savvy people across the world are psyching themselves up to register for the most significant exams of their career. The post-nominal designation of CFA requires candidates to overcome many a hard mile, but the challenge is worth the toil.
Read MoreHigher COGS in China Compared to the Rest of the World
Chart of the Day: We have combined the financial statements of China-listed non-financial companies into one for the past 23 years. Even though China’s gross profit margin is lower, the net profit margin is about the same as the global average. Implying that China has higher COGS but lower SG&A and other costs than firms globally.
Read MoreAsset Turnover Has Fallen Across the Globe
Chart of the Day: We have combined the financial statements of globally-listed non-financial companies into one for the past 23 years. The asset turnover ratio has averaged 78% and has fallen from a high of 92% to a low of 64% in 2016.
Read MoreGlobal Companies Make a 5% Net Profit Margin
Chart of the Day: We have combined the financial statements of globally-listed non-financial companies into one for the past 23 years. The average number of companies included in this study was 12,586 per year and as of 2017, it was 17,159. Global net profit margin has averaged 5.1%.
Read MoreVMC: Mistake #7: Valuing a Stock Using the Calculated Beta
Let’s move onto one of the most interesting subjects in valuation: beta. Discussing this crucial element of investing will helps us shed more light on the connected #7 top valuation mistake of valuing a stock using the calculated beta.
Read MoreGlobal Gross Profit Margin Is on Average 28%
Chart of the Day: We have combined the financial statements of globally-listed non-financial companies into one for the past 23 years. The average number of companies included in this study was 12,586 per year and as of 2017, it was 17,159. The gross profit margin has averaged 28.4% over the 23 years.
Read MoreVMC: Fundamental vs. Technical Analysis for Investing
Investors use a number of techniques to evaluate stocks before making a trade or long-term investment decision. The two core techniques used can broadly be divided into fundamental analysis and technical analysis.
Read MoreVMC: Mistake #6 – Underestimating Working Capital Investment
When forecasting deviations from that trend, have a strong reason and tell the accompanying narrative accurately. There’s nothing wrong with forecasting a change or a difference from the past—just be able to back up your analysis. What a great opportunity to tell the story that you’re seeing!
Read MoreVMC: The Motivation, Impact, and Pain of Share Buybacks
A share buyback is when a publicly-listed company uses cash to purchase its shares ‘back’ from the market. Also called share repurchase, the concept gives existing shareholders an option of selling their personal stakes back to the company. The only other way a company can distribute cash in such a manner is through dividends.
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