The numbers won’t lie

I think the balance of the decade of investing will be an ‘accounting’ decade.

If you can scrutinise numbers with a basis of pragmatism, the investing opportunities that may present themselves should be in your ‘wheelhouse’, ’sweet spot’ etc etc 

It’ll be important to adjust how you read a company’s current assets, such as discounting the amount they’ll receive for their inventories and receivables.

Hint: It won’t be 100% of their reported amounts.

In turn, should revenues recede, it will affect their EBIT

Rising net interest expense will also cut into EBIT.

Better make sure their net interest expense isn’t too much share of their EBIT.

Or that their total or net debt isn’t too stressful compared to their EBITDA

Is their capital expenditure going to be the same as last year or similar to the company’s guidance?

Because this could affect their free cash flow……..and their dividends.

Oh, and I don’t want to pay too much for their intangible assets (see goodwill).

I’ve seen these figures slashed under the guise of ‘impairments’.

After all of this, you may want to start musing about growth, eyeballs, clicks etc etc

December 13, 2022

by Rob Zdravevski

rob@karriasset.com.au