Compounding Quality

How to select stocks like Peter Lynch Here are the criteria Peter Lynch uses: • Trailing PE < 25 • Forward PE < 25 • Debt/Equity < 35% • EPS Growth > 15% • PEG Ratio < 1.2x • Market cap < $5 billion Grab the entire e-book in high resolution here: https://lnkd.in/e8R8k6E4

Accounting Handbook Everything you need to know to make sound Financial Decisions Credits: Financial Modeling World Cup 1. The Income Statement Guide 2. The Balance Sheet Guide 3. The Cash Flow Statement Guide 4. The Ultimate Budgeting Guide 5. Inventory Valuation Methods 6. Depreciation Methods 7. Accounting KPIs Guide 8. Types of Financial models __ Did you like this? Grab my free Financial Analysis Course here: https://lnkd.in/eJtj3pFa

WACC Cheat Sheet A company can only create value when ROIC > WACC But what is WACC? 1️⃣ Definition The Weighted Average Cost of Capital (WACC) signifies the average after-tax expense of capital for a company, encompassing various sources such as common stock, preferred stock, bonds, and other debt instruments. Consequently, WACC serves as the mean rate that a company anticipates paying to fund its operations. 2️⃣ Formula You can calculate WACC by applying the formula: WACC = [(E/V) x Re] + [(D/V) x Rd x (1 - Tc)] where: E = equity market value. Re = equity cost. D = debt market value. WACC is computed by multiplying the cost of each capital source (debt and equity) by its respective weight and subsequently summing those products together. 3️⃣ Essentials • WACC signifies a company's cost of capital, with proportional weights assigned to each category of capital (debt and equity). • To calculate WACC, multiply the cost of each capital source by its respective weight based on market value, then sum the results for the total WACC. • It serves as a benchmark rate for evaluating the attractiveness of projects or acquisitions for both companies and investors. • WACC functions as the discount rate for future cash flows in discounted cash flow analysis. 🤔 What's the most important thing in investing according to you? __ 📚 Grab the PDF in high resolution here: https://lnkd.in/e4DMudHM

👎 37 Of the Worst Corporate M&A Flops 👎 Deal failures of gigantic companies. ▪️ Sears and Kmart ▪️ Myspace and News Corp ▪️ Google and Nest ▪️ Zynga and OMGPOP ▪️ Yahoo and Tumblr ▪️ Sprint and Nextel … There are examples of some of the biggest M&A flops in recent decades. The failure rate of mergers and acquisitions is somewhere between 70% and 90%, so these examples shouldn’t be a surprise. BUT… The brand recognition these companies carry makes one realize how challenging it is to pull off a successful M&A deal. The top three most common reasons for M&A failure are: 1️⃣ Value destruction 2️⃣ Poor communication 3️⃣ Cultural differences Check out the reasons why these major corporate deals failed, including information on the date and valuation, in the document attached below. 👇 The deals are arranged chronologically, starting from the most recent ones. What are your thoughts on these corporate M&A flops? Serial Entrepreneur & Investor Helping Startups Become Unstoppable – David Hauser Source: CB Insights __ 💡Download my free PDF with 100 examples of great quality stocks here: https://lnkd.in/epJNgDvz

How to analyze an income statement 1️⃣ What is an income statement? - An income statement is also called a profit and loss account - It shows the company's revenue and expenses over a certain period - The income statement provides you with a lot of insights as it tells you how much revenue is translated into net income, the efficiency of management, and much more 2️⃣ Revenue - For a company, it all starts with its revenue or sales - Revenue is the money a company receives from selling its products and/or services 3️⃣ Costs Of Goods Sold (COGS) - Shows you all the costs a company makes to produce its products and/or services 4️⃣ Gross Profit - The profit a business makes after subtracting all the costs that are related to manufacturing and selling its products or services - Gross profit = Revenue – COGS 5️⃣ Operating Expenses (OPEX) - All the expenses a company makes to run its daily operations 6️⃣ Operating Income - Operating income = Gross profit – OPEX - The operating income shows you how much money a company earns from its normal business activities 7️⃣ Non-operating Income - Income and expenses that aren’t related to the normal business activities 8️⃣ Income Before Taxes - Income before taxes = operating income – non-operating income and expenses - Tells you how much profit the company has made before taxes 9️⃣ Net Income - The bottom line or net income of an income statement shows you how much money the company has made after subtracting all costs and taxes - Net income is also known as ‘earnings’ or ‘profit’ - Net income = income before taxes - taxes __ 📚 Did you like this? Grab the PDF in high resolution here: https://lnkd.in/eRHjjPQp

Behavioral Finance Masterwork Daniel Kahneman is the father of Behavioral Finance Here's a compilation of everything he has ever said and written My favorite resources: - Thinking Fast and Slow - The Little Book of Behavioral Finance - The Psychology of Money - The Behavioral Investor - Irrational exuberance 📚 Grab the resource in high resolution here: https://lnkd.in/eMtCfDyN

What is EBITDA? Does it even matter? Here's everything you need to know about this controversial accounting metric: 1️⃣ What is EBITDA? EBITDA stands for: • Earnings • Before • Interest • Taxes • Depreciation • Amortization In other words, it shows you what the company earns before costs like interest, taxes, depreciation and amortization are subtracted. 2️⃣ How can I calculate it? EBITDA = Net Income + Taxes + Interest Expense + Depreciation & Amortization OR EBITDA = EBIT + Depreciation & Amortiziation 3️⃣ EBITDA margin You can easily calculate the EBITDA Margin as follows: EBITDA margin = EBITDA / Revenue You want most revenue to be translated into EBITDA 4️⃣ Adjusted EBITDA versus EBITDA A lot of companies also use the Adjusted EBITDA instead of EBITDA. Adjusted EBITDA removes one-time, irregular, and non-recurring items that distort EBITDA. This will result in a higher figure. 5️⃣ EBITDA is NOT the same as Free Cash Flow In general, free cash flow is a way more reliable metric than EBITDA. Free Cash Flow shows you what a company REALLY earns in cash after deducting all expenses. 6️⃣ What's all the fuss about? Charlie Munger once said the following: "I think that, every time you see the word EBITDA, you should substitute the words bullshit earnings." But why? The issue with EBITDA is that it removes real expenses. That's why I would never look at EBITDA to analyze a company. 🤔 What's your takeaway on EBITDA? Join the discussion in the comments 👇 __ 📖 Download my free Financial Analysis course here: https://lnkd.in/es97d_sj

The Investor's Playbook An Investing E-book that is 100% free. Here's what you'll learn: - The best free investing tools - Analyze a stock in less than 5 minutes - How to analyze a stock - How to find quality stocks - What you need to know about free cash flow - What you need to know about Return On Invested Capital - What you need to know about moats - Everything you need to know about valuation - How to value stocks like a professional - My best investment ever - Strategies that outperform the market - Are markets efficient? - Foolish Wall Street - Everything you need to know about compounding - The importance of growth - Growth Investing with Philip Fisher - Screen for Quality Stocks - 10 Lessons from 20 years of quality investing - 10 Investment books you should read - How to find multibaggers - Skin in the game matters - 5 Reasons to buy a stock - Reasons to sell a stock - 100 Great books for Life and Investing - Capital allocation 🤔 What's the most important thing in investing according to you? __ 📚Grab the e-book in high resolution here: https://lnkd.in/e36fKfR6

Investment Masterwork I just found this investment gem. 150 pages with the wisdom of Howard Marks, Philip Fisher, Lou Simpson, Benjamin Graham, Joel Greenblatt, and many more. It's like a free book. Today I'm sharing it with you: - Seth Klarman's thoughts on risk - An investing checklist - Charlie Munger's rules for life and investing - Phil Fisher's investment framework - Lessons from Benjamin Graham - Four things NOT to do according to Joel Greenblatt - The process of valuation - Ray Dalio on "The Economic Machine" - Why smart people make big money mistakes - Principles of focus investing - 16 Rules for investment success And much more. 📚If you enjoyed this piece, please hit the “Like” button. Thank you for your support! __ 💡 You want to receive this PDF in high resolution? Grab it here: https://lnkd.in/ehvxtM_c

Peter Lynch returned almost 30% per year to investors. The Peter Lynch Playbook tells you everything you need to know about Peter Lynch's investment strategy. Here are his 10 most important investment rules. Rule 1: Know what you own You have to know what you own, and why you own it. When you know what you own, you’ll be able to take better investment decisions. Rule 2: Never invest in companies without understanding its finances The biggest losses in stocks come from companies with poor balance sheets. Only invest in good companies and your return will increase dramatically. Rule 3: Everyone has the brainpower to make money in stocks Everyone has the brainpower, but not everyone has the stomach. If you sell stocks in panic, the stock market is not for you. Bear market and crashes are GREAT investment opportunities. Rule 4: Make use of your edge Your investor’s edge is not something you get from Wall Street experts. It’s something you already have. Stock information can be found everywhere. On your work, when you go shopping, … Make use of it. Rule 5: Amateur investors have BIG advantages compared to professionals The stock market is dominated by a herd of professional investors. When you ignore them and think rational, you have a BIG advantage compared to professionals. Rule 6: Focus on the long term There is no correlation between the success of a company’s operations and the success of a stock over a few years However, in the long term stock prices will ALWAYS follow the underlying fundamentals of the company. If the company does well, you will also do well as an investor. Rule 7: Long shots always miss the mark Don’t invest in hypes or the next big thing. Instead, invest in quality companies with a healthy balance sheet, high profitability, and good capital allocation. Rule 8: Don’t overdiversify Owning stocks is like having children, don’t get involved with more than you can handle. You should be able to analyze and follow up on every stock you have in your portfolio. When you know what you are doing and made your homework, you’ll be able to take good investment decisions when they matter most. Rule 9: Have some cash on the sideline If you can’t find attractive companies, put your money in the bank until you discover some. It is always a good idea to have some cash on the sideline. This allows you to invest (heavily) when Mister Market has become (too) pessimistic. Rule 10: ROIC is key You want to invest in companies with a good capital allocation. The Return On Invested Capital (ROIC) is one of the most important metrics for quality investors. The higher, the better. 📚If you enjoyed this piece, please hit the “Like” button. Thank you for your support! __ 💡Download this PDF in high resolution here: https://lnkd.in/ePPfeyiC