1st) search companies that we nominaremos as good companies
How to determine that a company is a good company?
QUANTITATIVE CHECKLIST FOR INVESTING IN VALUE
1. are the performance of the company sufficiently consistent?
Shareholders capital net income ROE
We will set up at least an ROE above 15.
2. does the company have many debts?
Debt ratio: total capital debts of shareholders
It is interesting that the debt ratio is below 0.5.
3 are profit margins really high? Do the margins increase each year?
Profit margin net sales net income
A high and increasing profit margin is far from ideal, although this level is different in each sector by what should be studied carefully.
4. how long that the company is trading in the stock market?
We believe in investing in long-term, so we need companies with some baggage and to analyze data.
It is at least 10 years of contributions.
5. What book value shows positive growth?
EVALUATION OF FUNDING: INTRINSIC VALUE
“Rating a company is part art and part science.”
“There is no formula to resolve intrinsic value. It is necessary to know the company where you consider to buy shares.” With these two phrases we already put on notice that there is a magistral formula and do not know the future of nothing.
We look at the next 3 data:
The proportion of price earnings (PER) (average rating of long-term investors)
Profit per share (performance that a company achieves for every invested euro)
expected growth of earnings (potential future growth of the company)
As an example we use Inditex, a company that we catalogaremos as good company.
Inditex S.A. (2010)
Earnings per share Euro 2,00
Average proportion of price earnings (PER) 23.29
Average expected earnings (five years) 12 (per year)