Quick Analysis Using G.E.T.
Gross Profit Margin
Company with a Durable Competitive Advantage:
Undiscovered Company:
Equity Bond Theory
Equity Bond Theory for a Taxable Bond:
Equity Bond Theory for a Tax-Free Municipal Bond:
Total Long-Term Debt to Income Ratio
Price to Earnings Ratio
Consider buying the stock when:
Price to Book Ratio
Consider buying the stock when:
Analysis of the Income Statement
Gross Profit Margin
Company with a Durable Competitive Advantage:
Undiscovered Company:
Business Cost to Gross Profit Ratio
For a good company:
For a great company:
Research and Development
For a company with a Durable Competitive Advantage:
If the company has Research and Development cost, that is if:
Use this ratio as a guide:
Depreciation/Amortization to Gross Profit Ratio
Interest Expense to Operating Income
For companies in the consumer products industry:
For companies in other industries:
Net Income to Total Revenue Ratio
For companies with a Durable Competitive Advantage:
For undiscovered or good companies:
For companies in the financial industry use a ratio of less than 20% as a guide:
Net Income
Quick Check for Accounting Gimmicks
Equity Bond Theory
Equity Bond Theory for a Taxable Bond:
Equity Bond Theory for a Tax-Free Municipal Bond:
Analysis of the Balance Sheet
Cash and Short Term Investments
Check if Cash and Short Term Investments are historically consistent with Net Income:
and
Total Receivables to Gross Profit
Total Receivables to Gross Profit must be consistently less than its competitors:
Inventory
Check if Inventory and Net Income are on a historical corresponding rise:
and
Property/Plant/Equipment
Check if Property/Plant/Equipment is greater than Total Debt:
Check if Property/Plant/Equipment is increasing with Net Income:
and
Intangibles and Brand Name
Give the company's brand name an estimated worth and add it to Intangibles.
Total Assets
Check if Total Assets is a very large number. More is better.
Long Term Investments
Google what the company's Long Term Investments are. There might be something very valuable here.
Notes Payable/Short Term Debt
Check if Notes Payable/Short Term Debt is less than Cash & Equivalents and Long Term Debt.
and
Current Portion of Long Term Debt/Capital Leases
Check if Current Port. of LT Debt is much less than Cash & Equivalents:
Check the company's financial health:
Check if the company will survive a recession:
If the company's financial health is not good, meaning the company has more debt due than cash, these are the potential outcomes:
| Does the company have a Durable Competitive Advantage? | Potential Outcome |
| Yes | Take Over Target |
| No | Bankruptcy |
Total Long-Term Debt to Income Ratio
Adjusted Debt to Equity Ratio
Preferred Stock
Companies that have a Durable Competitive Advantage usually do not have Preferred Stock.
Retained Earnings
Check if the company has Retained Earnings:
Check if Retained Earnings is growing over the years:
Determine the Retained Earnings growth rate:
During a recession check if the company has enough cash to survive:
Treasury Stock
Check for stock buybacks:
Return on Shareholder's Equity
Check if Return on Shareholders' Equity is greater than 20%:
True Return on Shareholder's Equity
If the company has Treasury Stock:
Check if True Return on Shareholders' Equity is greater than 20%:
If Shareholder's Equity is Negative
If Shareholders' Equity is negative check the 10 Year Summary for strong Net Income:
| If the Company has Negative Equity | |
| Durable Competitive Advantage | Strong Net Income (10 Year Summary) |
| Competitive Industry | Erratic Net Income (10 Year Summary) |
Analysis of the Cash Flow Statement
Capital Expenditures
For a good company:
For a great company with a Durable Competitive Advantage:
Issuance Retirement of Stock
Add all the values for the previous years and see if you get a negative number:
