The Ein55 students have learned the details of Business Analysis Course #2 (Business Valuation) from Ein55 Mentor Kean Lim, understanding how to evaluate values of a company with stock, as well as avoiding accounting traps. Here is the key summary:
1) Check what is the Auditor’s Opinion
– Unqualified / Qualified / Adverse / Unable to give an opinion (Disclaimer)
2) Know why ROE is rising or falling, high or low
– Net profit margin, Asset turnover, Financial leverage
3) Check whether a company uses Aggressive Accounting
– Aggressive revenue recognition
– Days Sales Outstanding
– Days Inventory
– Large changes in operating expenses
– Over-dependence on acquisition
– Quality of earnings
4) Derive the intrinsic values based on
– asset value
– earning value
– growth value
5) Combine various valuation methods with Optimism Strategies
– buy at price below the value, selling at price above the value.
6) Investor can purchase the best stock in the world, but if one buys it at a high premium, it can be a bad investment.
– Valuation is important and is a huge part of the game.
Investing in a company is akin to being in partnership with its business. It is therefore crucial for investors to possess the ability to analyse and make sense of the businesses of interest. The beauty of investment is that one can be selective to only invest in businesses that are profitable and therefore can bring about considerable capital gains in future.
Dr Tee provides free high-quality investment education regularly to the general public, including Business Analysis (BA), Fundamental Analysis (FA), Technical Analysis (TA), Optimism Analysis (OA) and Personal Analysis (PA). The knowledge could help a person for a lifetime, after mastering the right skills of stock investment. Register Here.
