Trust the Process

Resources used: SeekingAlpha, Stratosphere.io, AlphaSpread, ROIC.ai

Before you start, remember no company should be eliminated until comparison with expectations made. Then, does it meet YOUR hurdle rate.

Napkin screen for value and quality, use SeekingAlpha Valuation tab (sub GuruFocus):
P/E Ratio: _______
EV/EBIT Ratio: _______ *inverse is pretax earnings yield.
EV/FCF: _______ *compare FCF with operating CF also (CapEx)

ROIC: ____. ____. ____. ____. ____. TTM ____.
Greenblatt uses ROIC = EBIT / Net tangible capital.
Net tangible capital is = NWC + Net equipment.
Eliminate excess cash, goodwill, and accts payable debt.
Cost of capital: _____
Consumer or production based advantage? _____.
Sustainable? ______. Expect reversion to mean eventually.
*Consider industry, does ROIC need to be adjusted for SG&A.

Revenue CAGR (3y): ______
Operating profit CAGR (3y): ______
FCF CAGR (3y): ______
*True FCF = Cash from Operations - (maint) CapEx +- Change in NWC

Financials
Balance sheet
Cash: _____. Trend: ____. Source: ______ (Cash flow statement).
Cash valued at: _____. *i.e. if losing money it may get drained.
AR: Rapidly rising? ____
LT Debt: ______

Share trend: ______

Margins
LTM Gross margins: ____. Improving? ____
LTM Operating margins: ____. Improving? ____
LTM Earnings margins: ____. Improving? ____

Maintenance CapEx: ______


Working Backward: Price to FCF

Market Expectations:


Ownership/Management notes:

SEC/EDGAR filing notes:

Transcript notes:


Subjective analysis

3-year expected valuation (Probabilities, consider affect):

Is it high magnitude reward, for the risk?

Does it meet your hurdle rate, as best (or close) investment?

Change/disruption possible:

Naturalistic decision making (flexibility) watch list:

Paul Weaver

Charlotte, NC