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Archive
Business models and competitive moats
A business model tells you how a company makes money. A moat tells you whether it can keep making it that way, and here's how to test for evidence instead of just a good story.
Nvidia: Cheaper at $217 than it was at $52?
Nvidia's share price has risen more than fourfold since early 2024, yet its P/E has fallen from about 69x to 27x, because earnings grew even faster. A multiple that low against a company's own history is a question, not an answer: will the growth behind it fade faster or slower than the price assumes?
Capital structure and shareholder dilution
How a company funds itself and returns cash to shareholders shapes their outcome as much as how much profit it makes. Here's how to think about debt versus equity, buybacks versus dividends, and how to track whether shareholders are gaining ground or being quietly diluted away.
Statement linkages and earnings quality
The three financial statements aren't three separate documents, they're one connected story told from three angles. Here's how they link together, and how to use that connection to check whether a company's earnings are as good as they look.
Accrual accounting and the choices behind the numbers
A financial statement isn't a neutral photograph of a business, it's the output of accounting choices. Here's what those choices are, and why the same year can look very different depending on which number you're reading.
Amazon: How much of the profit is real, and will $220 billion pay off?
Amazon earns most of its revenue from retail but most of its profit from AWS, and its reported earnings have been lifted by tens of billions in paper gains on its Anthropic stake. With $220 billion of planned spending set to consume the cash its businesses generate, how much of the profit is real, and will the AI bet pay off?
Historical valuation and mean reversion
A company's own trading history is a peer group of one. Learn how to read the way revenue, margins, profits, and the balance sheet have changed over time, build a historical valuation range, and judge when a return to the average is a fair expectation and when the business has simply moved on.
Lululemon unraveling at its seams?
Lululemon has lost more than three quarters of its value since its 2023 peak, undone by a repeat quality scandal, a failed pivot into home fitness, and a consumer pulling back. At 8 times earnings with a debt free balance sheet, is the market pricing in permanent brand damage, or a loss of confidence a new CEO can still reverse?
Peer group and relative valuation
A P/E ratio means nothing until you know who it's being compared to. Here's how to build a peer group that holds up, and what to do when a company doesn't have a clean one.
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AppLovin: Falling Knife or Deep Value Play?
AppLovin's stock fell nearly half in three separate stages even as growth and margins stayed strong, while a separate, unresolved SEC investigation questions the very measurement transparency the business is built on. Is this a business the market mispriced, or one still finding its bottom?
You don't need a Bloomberg terminal: free tools for finding a company's numbers
Every number we use comes from somewhere. Here's exactly where to find it yourself, for free, without a Bloomberg terminal or a paid research subscription.
Understanding the discounted cash flow (DCF) method
A DCF does not predict the future, it makes your assumptions about a company's future cash flows explicit enough to question. Here is how the standard method, terminal value and all, fits together.
New tool: DCF Calculator
A free discounted cash flow calculator, project free cash flow and get a fair value per share.
Palantir, a lesson in narrative investing
Palantir's price surged about 29% after a Q2 earnings report that came in much stronger than expected and raised full year guidance. Yet the stock still trades at nearly 140 times earnings, a steep premium to the rest of its sector. What is that price paying for?
Poker, Not Roulette: Why New Investors Should Start Small
Two very different companies, two unsettled stories. Here's the lesson underneath both: no story is ever certain, which is why new investors should start small.
Micron, a lesson in growth investing
Micron's stock is up roughly 650% over the last year, driven by AI memory demand. Is this a structural shift or a bubble waiting to burst?
Adobe, a lesson in value investing
Adobe's stock has fallen 70% from its 2021 high while revenue and margins stay strong. The market is betting AI will erode its moat. Is that bet right?
Going deeper with ratios
Beyond the four foundational ratio categories, there are three more that experienced investors use to assess how efficiently a company deploys its capital, uses its assets, and rewards its shareholders.
The four types of ratios
Ratios fall into four categories, each answering a different question about a company. Knowing which category a ratio belongs to tells you what it is measuring, and what it cannot tell you.
Understanding ratios
Margins tell you how profitable a company is. Ratios go one step further and tell you whether the stock price reflects that profitability fairly, generously, or not at all.
Investing in the S&P500
Everybody buys the S&P 500 as a way to diversify across the US market. But a handful of companies now account for more of the index than most investors realize.
Understanding margins
The same income statement looks completely different depending on the size of the company. Margins strip away size and let you compare any two companies, or a company against its own past, on equal footing.
New tool: Cash Flow Statement
An interactive walkthrough of the cash flow statement, line by line.
New tool: Balance Sheet
An interactive walkthrough of the balance sheet, line by line.
Understanding financial statements
Every listed company publishes three core financial statements. Together they tell the full story of a company's financial health, if you know how to read them.
New tool: Income Statement
An interactive walkthrough of the income statement, line by line.