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What should I know to explore value investing?
Price, business quality, cash generation and the reasons a low-looking valuation may be deserved.
- 01Understanding companies · beginnerRead guide
What does valuation mean?
Valuation is the process of relating an asset's price to the cash, earnings, assets or outcomes it may provide. It produces a conditional estimate or comparison, not an observable fact.
- 02Understanding companies · beginnerRead guide
What is a P/E ratio?
A P/E ratio compares a company's share price with the earnings attributed to each share.
- 03Understanding companies · beginnerRead guide
Book value
Book value is the accounting value of assets minus liabilities attributable to owners. It records recognised balance-sheet amounts, which can differ greatly from market or economic value.
- 04Understanding companies · intermediateRead guide
Price-to-book ratio
Price-to-book compares the market value of equity with its accounting book value. It shows the premium or discount applied to the recognised net assets, not whether that pricing is justified.
- 05Understanding companies · intermediateRead guide
Free cash flow
Free cash flow is cash generated after a defined set of operating and investment needs. There is no single universal version, so the calculation must state what is free and for whom.
- 06Understanding companies · intermediateRead guide
Competitive advantage
A competitive advantage is a capability or position that helps a company sustain attractive economics against rivals. It matters only while it remains valuable, difficult to copy and properly exploited.
- 07Understanding companies · beginnerRead guide
Company debt
Company debt is borrowed capital that creates contractual payment obligations. It can fund productive investment, but fixed claims make the owners' remaining outcome more sensitive.
- 08Understanding companies · intermediateRead guide
Cyclical and defensive companies
Cyclical companies' demand and profits tend to move strongly with economic conditions; defensive companies tend to face steadier demand. The distinction is a spectrum, not a permanent label.