130 lines
3.1 KiB
Markdown
130 lines
3.1 KiB
Markdown
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# Fundamental Analysis Reference
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## Analysis Framework
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### 1. Business Quality Assessment
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**Competitive Advantages (Moats)**
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- Brand strength
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- Network effects
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- Cost advantages
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- Switching costs
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- Patents and intellectual property
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- Regulatory barriers
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**Management Quality**
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- Track record of capital allocation
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- Insider ownership
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- Compensation structure alignment
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- Communication transparency
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**Business Model**
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- Revenue streams diversity
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- Scalability
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- Margin sustainability
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- Customer concentration risk
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### 2. Financial Health Analysis
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**Profitability Analysis**
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- Gross margin trends
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- Operating margin trends
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- Net margin trends
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- Return on Equity (ROE) trends
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- Return on Assets (ROA) trends
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- Return on Invested Capital (ROIC) trends
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**Growth Analysis**
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- Revenue growth (YoY, QoQ)
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- Earnings growth (YoY, QoQ)
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- Free cash flow growth
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- Market share trends
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- Geographic/segment growth breakdown
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**Balance Sheet Strength**
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- Debt-to-Equity ratio
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- Current ratio
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- Quick ratio
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- Interest coverage ratio
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- Cash position vs debt
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- Working capital trends
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**Cash Flow Analysis**
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- Operating cash flow consistency
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- Free cash flow (OCF - CapEx)
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- Cash conversion rate
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- Capital expenditure trends
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- Dividend sustainability
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### 3. Valuation Analysis
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**Relative Valuation Metrics**
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- P/E ratio (vs historical, vs peers, vs sector)
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- Forward P/E
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- PEG ratio (P/E / growth rate)
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- P/B ratio (Price-to-Book)
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- P/S ratio (Price-to-Sales)
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- EV/EBITDA (Enterprise Value / EBITDA)
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- EV/Sales
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**Absolute Valuation**
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- Discounted Cash Flow (DCF) principles
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- Estimate intrinsic value range
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- Margin of safety calculation
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### 4. Industry and Market Analysis
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**Industry Dynamics**
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- Industry growth rate
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- Industry lifecycle stage
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- Competitive landscape
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- Barriers to entry
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- Regulatory environment
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- Technological disruption risk
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**Market Position**
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- Market share
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- Competitive positioning
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- Customer loyalty metrics
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- Pricing power
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### 5. Risk Assessment
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**Company-Specific Risks**
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- Key person dependency
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- Customer concentration
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- Supplier concentration
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- Product concentration
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- Litigation risks
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- Regulatory risks
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**Market Risks**
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- Economic sensitivity
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- Interest rate sensitivity
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- Currency exposure
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- Commodity price exposure
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## Analysis Workflow
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1. **Understand the business** (what they do, how they make money)
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2. **Assess competitive position** (moats, market share)
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3. **Analyze financial statements** (trends over 3-5 years)
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4. **Calculate key metrics** (profitability, growth, leverage)
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5. **Compare to peers** (relative positioning)
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6. **Value the company** (multiple approaches)
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7. **Identify risks** (company and market level)
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8. **Determine investment thesis** (bull and bear cases)
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## Red Flags to Watch For
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- Declining margins
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- Consistently negative or declining free cash flow
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- Rising debt without revenue growth
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- Frequent non-GAAP adjustments
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- High executive turnover
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- Customer concentration > 10% from single customer
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- Inconsistent accounting changes
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- Poor cash conversion (earnings growth >> cash flow growth)
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- Deteriorating working capital
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- Rising accounts receivable/inventory faster than revenue
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