How to research a company in one evening
Four questions, always in this order: what does it do, does it make money, will it survive, is it cheap.
Turn an unfamiliar ticker into an opinion you could defend out loud.
How to research a company in one evening works, in one picture
The same argument as the text, as a chain. Each step is what makes the next one possible.
The order matters more than the maths
Cheapness is the last question. Ask it first and you produce a list of companies the market has given up on, and it is usually right.
- 1
Explain the business in one sentence, out loud
Not what it sells. How it makes money, and why anyone pays it more than it costs to produce. If you cannot do this, no ratio will save you, and you should stop here without embarrassment.
- 2
Read five years, not one quarter
FinancialsRevenue and net income across eight periods, then free cash flow underneath. You are looking for two things: a line that generally rises, and a gap between profit and cash that is not widening. Profit climbing while cash stagnates is the single most reliable early warning in accounting.
SteadyShares draws this for you on the Financials tab, US filings straight from SEC EDGAR, so you are looking at the primary source rather than someone's summary of it.
- 3
Check it can survive being wrong
StatisticsDebt to equity, and interest coverage. Below about 2 times coverage, one bad year hands the company to its lenders. Debt does not make a business bad. It removes its right to be wrong, and businesses are wrong quite often.
- 4
Compare it with the people trying to kill it
CompareA company in isolation tells you nothing. Line it up against its sector peers on margins, returns and growth trajectory, indexed to the same starting point, and the winner is usually obvious within a minute.
- 5
Only now, look at the price
Cheapness is the last question. A bad business at a low price is still a bad business, and the low price is usually the market being right rather than the market being asleep.
If you looked at the chart first, you have already anchored. Everyone does it. Notice that you did.
Ordinary. The market expects steady, unremarkable growth.
You can defend a buy or a pass in four sentences, without mentioning the share price chart.
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Four questions, always in this order: what does it do, does it make money, will it survive, is it cheap.
1,100+ companies across 17 exchanges, filtered on any combination of moat, valuation, growth and debt.