1/n #FundamentalAnalysis Thread:
First Principle: Return on Capital Generated by Business (ROCE) > Cost of Capital (WACC). For most good businesses ROCE/WACC > 1.0x
First Principle: Return on Capital Generated by Business (ROCE) > Cost of Capital (WACC). For most good businesses ROCE/WACC > 1.0x
2/n Second Principle: Growth: Simple way to look at growth is Sales Growth should exceed country's nominal growth rate without dilution of margins. (EBITDA Margins)
3/n Analyse the Cost Base: Higher the Fixed Cost Bigger the Operating leverage, which is good for cyclical businesses when coming out of weak business cycle but is equally detrimental when business cycle peaks.
4/n Valuation Thumb Rule: 3P Condition for selling (courtesy @VetriSmv ) Peak Growth, Peak Margins and Peak Multiple.
5/n Wisdom (Unsaid Rule): SmallCap companies with high cash balances underperform as scaling is a skill much appreciated by markets which you can't do if you hoard cash.
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