1, free cash flow (FCF)
About FCF
A.FCF refers to the funds that a company can withdraw every year without damaging its core business.
B. If a company's FCF accounts for 5% or more of its revenue, you will find a printing machine.
C. Many companies have negative FCF at the initial stage of rapid expansion (such as Starbucks and The Home Depot).
At this time, you should constantly confirm from various information sources: Is this company making money with every penny it earns, instead of doing other things?
2. Operating cash flow (OFC)
About OFC
A. Operating cash flow refers to the cash flow generated by "activities of directly producing products, selling commodities or providing services".
B. Personally, it is understandable that FCF is negative, but OFC is more troublesome.
Because companies with negative cash flow will eventually have to seek other financing by issuing bonds or stocks.
This not only increases the company's operational risk, but also dilutes the rights and interests of shareholders.
C. For companies with negative OFC, it is necessary to check whether their accounts receivable have increased significantly.
If the accounts receivable increase substantially, even exceeding the sales growth, the company is likely to fall into a passive state of making ends meet, so we should be alert to the risk of its capital chain breaking.
D go deep into the "consolidated cash flow statement" to check the specific content of OFC and find "salary" and "various taxes and fees"
3.PCF)= share price/cash flow per share.
About the market price
A spot exchange rate can be used to evaluate the price level and risk level of stocks.
B The smaller the P/B ratio, the more the cash per share of listed companies will increase, and the less the operating pressure will be.
A high P/B ratio means that a company trades at a high price, but it does not generate enough cash flow to support its high share price.
D On the contrary, the smaller P/B ratio proves that the company is generating enough cash, but this cash is not reflected in its share price.
4. Cash conversion cycle
About CCC
A.CCC is used to measure the speed at which a company can convert cash into more cash.
B. If CCC is negative, it means that the turnover days of inventory and accounts receivable are very short, while the deferred days of accounts payable are very long, so the company can control the amount of liquidity to a minimum.
C.CCC is often used to compare companies in the same industry.
Part b profitability
1, gross profit (gross profit margin)
About gross profit margin
A. What you want to see is a stable gross profit margin as a star.
B. The ups and downs of income and gross profit represent two things:
This company is in an unstable industry.
(2) It is being attacked by its competitors to survive.
2. Net profit margin.
About the net profit rate of sales
A. While an enterprise is expanding its sales, its net profit may not necessarily increase proportionally due to the increase of the three expenses.
The net profit rate of sales can just reflect the proportion of net profit brought by sales.
B. If the net sales interest rate is 10%, then every time the company sells 1 yuan of goods, 1 cent is the net profit.
3. Asset turnover rate
About asset turnover rate
A. The asset turnover rate reflects the flow speed of all assets from input to output during the operation of the enterprise, and reflects the management quality and utilization efficiency of all assets of the enterprise.
B. The higher the value, the faster the turnover rate of total assets and the stronger the sales ability.
4. Return on assets
About ROA
A. Similar to the net profit rate of sales, ROA tells us how much profit a company's assets can generate.
B if ROA = 10%, the company will have 1 cent as its net profit for every 1 yuan of assets.
5. Asset-equity ratio
On the ratio of assets to rights and interests
A. The asset-equity ratio is used to reflect the degree of the company's liabilities relative to the owner's equity, and to measure its solvency.
B. If a company belongs to a cyclical industry or its income is unstable, and its asset-equity ratio is high, it is necessary to be vigilant!
Because "total assets = shareholders' equity+liabilities", if shareholders' equity is small, it means that liabilities will be high.
6. Return on equity
About ROE
A.ROE measures the profits generated by shareholders' capital.
B Another calculation method of ROE is ROE = net profit/shareholders' equity.
C if ROE = 10%, as a shareholder, the company will generate a net profit of 1 cent for every 1 Yuan You investment.
D if a non-financial company can't achieve a four-year ROE of more than 65,438+00% within five years, it's not worth your time.
E. For enterprises that use financial leverage a lot, 15% ROE is the minimum standard for screening high-quality companies.
7. Return on investment capital (ROIC)
About ROIC
A.ROIC is used to measure the rate of return of a company in allocating its investment resources.
B. If a company's ROIC remains above 25% for several years in a row, we can immediately assert that it is a company worth tracking.
C. On the contrary, if a company's ROIC has been below 10%, we can immediately conclude that it is a mediocre company.
8. Dividend yield
On dividend yield
A dividend yield is an important reference standard for selecting income-oriented stocks. If the annual dividend yield exceeds the 1 year bank deposit rate for many years, this stock can basically be regarded as a revenue-oriented stock.
9. P/E ratio = share price/earnings per share
On marketing rate
A. Using this indicator to select stocks can eliminate those stocks whose P/E ratio looks reasonable, but whose main business has no core competitiveness and mainly relies on non-recurring gains and losses to increase profits.
B. Because sales are usually more stable than net profit, the marketing rate only considers sales, so the marketing rate is very suitable for measuring companies whose net profit changes greatly every year.
C. A high marketing rate means that the market has more expectations for the company's profitability and growth, while a low marketing rate means that investors pay little for the company's sales per yuan.
D. Sales ratio is usually only compared in the same industry, and is usually used to measure companies with poor performance, because they usually have no P/E ratio to refer to.
Part c: growth
1, revenue growth rate.
About income growth rate
A. What you want to see is a stable revenue growth rate.
A company can improve its profits in many ways.
But whether it is to cut costs or reduce advertising. They are only temporary measures, and the factor that can ultimately support the company to improve profits for a long time is the increase in sales.
C there are four ways for a company to increase its sales: ① to sell more products or services; ② Increase the price; (3) selling new products or services; ④ Acquisition of other companies.
D In O 'Neill's CAN SLIM theory, the quarterly sales of bull stocks should also increase by at least 25% (year-on-year);
In other words, in the past three quarters, sales continued to rise (chain).
2. Net profit growth rate.
About the growth rate of net profit
A. If the net profit has increased by 20%, but the earnings per share has only increased by 5%, such a company can forget it.
B. If a company's profits include non-recurring profits brought about by similar behaviors such as real estate sales;
Then this part of income should be excluded from the statement, because this kind of profit is one-off.
C. it is enough to control the growth rate of net profit at 25%-30%. In the face of excessive growth rate, you must first analyze its composition, and then you must ask yourself:
Can we maintain such a high growth rate in the coming year? Otherwise, people's expectations for it will drop immediately.
3. Earnings per share
About EPS
A in o' neill's CAN SLIM theory, the EPS of bull stocks should increase by 25% or more every year in the last three years.
B in some cases, it is ok to reduce the income for one year, but it is necessary to ensure that the income in the next few years can recover lost ground and rise to a new height.
C also in the above theory, the EPS in recent quarters should increase by at least 18%-20%, preferably 25%-30%. In short, the higher the better.
4. P/E ratio
About price-earnings ratio
A. In Peter Lynch's "six types of companies" theory, slow-growing companies have the lowest PE;
The PE of fast-growing companies' stocks is the highest, and the PE of cyclical companies' stocks is somewhere in between.
B. Some investors looking for bargains think that no matter what stock, as long as its PE is low, they should buy it;
But this investment strategy is not correct, and there are many other aspects to consider.
C. remember: for companies with reasonable pricing, PE≈ revenue growth rate (EPS growth rate).
If PE
5. PEG (P/E ratio relative profit growth rate)
About PEG
A. A typical feature of a fast-growing company with low PE is that PEG will be very low.
B. Investors generally think that stocks with PEG lower than 1 can be considered as good investment targets, and the lower the better (even lower than 0.5).
However, some investors said that PEG stocks in the range of 0.7-0.8 are the most suitable for investment.
C. Since the growth rate of net profit cannot be guaranteed to be stable, I suggest that the current PEG be calculated after averaging.
But this situation does not include companies that have experienced extreme values, so it is not good to use average values.
6. (Growth rate of earnings per share+dividend yield)/P/E ratio
About this indicator
A. This is an indicator put forward by Lynch when talking about the price-earnings ratio, which measures the relationship between the sum of earnings per share and PE.
B. When the result is greater than 2, the stock has extremely high investment value; 1 to 2, the stock is not bad; When it is less than 1, the value of stock investment is not high.
Part d: financial health
1, asset-liability ratio (debt-to-assets ratio)
About asset-liability ratio
A. Some investors said that the proportion should not exceed 30%, if it exceeds 50%.
Then the investment risk of enterprises will be very large, because once the capital chain breaks, high debt ratio means bankruptcy. (Not applicable to banking stocks)
B for any kind of debt, an appropriate amount can promote income, but excessive debt may lead to disaster.
2. Debt-equity ratio
On the debt-equity ratio
A. Debt-to-equity ratio reflects the capital structure in the balance sheet and shows the utilization degree of financial leverage. It is actually another aspect of the asset-liability ratio.
B usually, a low debt ratio proves that the safety factor of an enterprise is high, but too low means that the capital operation ability of the enterprise is poor.
3. Current ratio
On current ratio
A. The current ratio is used to measure the ability of an enterprise to convert its current assets into cash to repay its liabilities before the short-term debt expires.
B. when the current ratio is >; 2. It shows that current assets are twice as much as current liabilities, and even if half of current assets cannot be realized in a short period of time, all current liabilities can be guaranteed to be repaid;
When the flow ratio
4, quick ratio (quick ratio)
quick ratio
A the quick ratio, like the current ratio, reflects the liquidity of unit assets and the ability and level of quick repayment of due liabilities.
B quick assets are those that can be realized in a short time.
C. Quick ratio is deducted from current assets:
(1) inventory with poor liquidity (2) unrealized prepaid expenses, as the basis for paying current liabilities, to make up for the shortage of current ratio.
D. when the quick action ratio is greater than; 1, with good liquidity; When the quick ratio
5, Inventory (inventory)
About the increase and decrease of inventory
A. the increase in inventory is usually a bad signal for both manufacturers and retailers.
This is a very dangerous signal when the inventory growth rate is faster than the sales growth rate.
B. If the company can't get rid of all the overstocked inventory, the overstocked inventory will become a big problem next year, and the year after next will be more serious.
New products will compete with the old products in the market, resulting in more inventory backlog.
In the end, the overstocked inventory forces the company to reduce the price, which means that the company's profit will drop.
C. If the inventory of a depressed company begins to decrease gradually, it should be the first signal that the company's operating conditions are improving.
On inventory turnover rate
A. Because inventory takes up capital (cash can't be converted into inventory in the warehouse), a company's inventory turnover rate has a great influence on the rate of return.
For a high-tech enterprise (rapid inventory depreciation) or a dairy enterprise (rapid inventory expiration), slow turnover is terrible.
B. Inventory turnover rate reflects the level of enterprise inventory management, and also affects the short-term solvency of enterprises.