From Morningstar: 2024-06-04 10:30:00

Building a mental map for equity investing involves qualitative and quantitative analysis, looking at the company’s story and numbers. Morningstar Premium provides financial data for analysis. Start with the profit and loss statement for revenue growth and margins. DuPont analysis breaks down return on equity into net profit margin, asset turnover, and leverage. Operating cash flow and balance sheet analysis are crucial for understanding a company’s financial health. Financial leverage through debt and free float can impact return on equity. Looking at ratios like net debt/EBITDA can indicate financial leverage risk. Leveraged returns can quickly vanish during downturns. A business should have stable returns on invested capital as it grows. Analyzing financial data can help build a picture of potential investment opportunities.



Read more at Morningstar: How to Use Company Financials to Invest