Insights archive

Return on Assets - ROA

Return on Assets (ROA): Evaluating Asset Performance

Return on Assets (ROA) is a financial ratio that measures a company's ability to generate profits from its assets. It provides insights into how efficiently a company utilizes its assets to generate earnings.

Constellation Software's Mark Leonard looking out over the Toronto skyline and the constellation of stars

Business Philosophy

Collection: Mark Leonard's Shareholder Letters

The complete collection of Mark Leonard's Constellation Software Shareholder Letters (2007-2021).

EBITDA Margin

EBITDA Margin: A Common Profitability Metric

EBITDA margin is a financial metric that provides insights into a company's profitability and operating efficiency. It measures the percentage of earnings before interest, taxes, depreciation, and amortization (EBITDA) relative to total revenue.

Valuation Metrics - P/E, EV/EBIT, and how to use them!

Valuation Metrics: Estimating the Worth of a Company

In this article, we will explore key valuation ratios, discuss the best metric for valuing a company, define valuation matrices, and determine what constitutes a good valuation ratio.

Gross Margin

Gross Margin: Calculations and Analysis

Gross margin is a key financial ratio that provides insights into a company's profitability at the gross profit level. It helps stakeholders understand the portion of revenue remaining after deducting the direct costs associated with producing goods or providing services.

Enterprise Value - How to calculate it!

The Importance of Enterprise Value

Enterprise value (EV) provides a comprehensive assessment of a company's total value, taking into account its market capitalization, debt, and cash. In this article, we will explain the concept of enterprise value, how it is calculated for both public and private companies, and the use of EV/EBIT ratio as a valuation metric.

Operating Leverage

Operating Leverage: A Game-Changer for Financial Success

Operating leverage is a financial concept that measures the impact of fixed costs on a company's profitability. This article seeks to explain the concept of operating leverage, its formula, and whether high or low operating leverage is preferable.

Sam Zell: 8 Investing Lessons

Investment Strategy

Sam Zell: 8 lessons

Sam Zell focuses on understanding the intrinsic value of assets rather than following market trends, making investments that logically make sense based on in-depth industry analysis.

Free Cash Flow Margin

Free Cash Flow Margin: Why It Matters and How to Calculate It

Free cash flow margin is a crucial financial ratio that measures a company's ability to generate cash from its operations after accounting for capital expenditures. It evaluates the percentage of free cash flow relative to total revenue, providing insights into the company's financial health and cash generation efficiency.

Discounted Cash Flow Analysis - How to value a business?

A Step-by-Step Guide to Discounted Cash Flow Analysis

This article focuses on the concept of discounted cash flow, its relationship to net present value (NPV), the significance of the weighted average cost of capital (WACC), and provides an example of a discounted cash flow analysis.

Current Ratio

Current Ratio: Understanding Its Significance and Interpretation

The current ratio is a fundamental financial metric that assesses a company's ability to meet its short-term financial obligations. It is a valuable indicator of liquidity and helps stakeholders evaluate a company's financial health.

Year on Year - YoY - Y/Y

Year-over-Year (YOY): Meaning, Formula, and Application

Year-over-Year (YOY) is a widely used term in financial analysis that compares the performance of a specific financial ratio or variable over consecutive periods, typically year to year. It provides valuable insights into the growth or decline of a particular measure, allowing businesses and analysts to assess trends and identify patterns.

David Barber: Delivering Shareholder Value

Business Philosophy

David Barber: Delivering Shareholder Value

Recapping David Barber's speech, co-founder of Halma, from 1997 describing the secret of the group’s success as a combination of strategic long-term vision and steady purpose.

Market Value  Ratios

Market Value Ratios: Understanding Their Significance and Calculation

Market value ratios are crucial financial metrics used by investors, analysts, and businesses to assess the valuation and market perception of a company. These ratios provide insights into how the market values a company's stock and its growth potential.

Quick Ratio

Quick Ratio: A Crucial Indicator for Financial Health

Financial analysis is riddled with numerous financial ratios, each serving a unique purpose. One of the most important among them is the quick ratio. In this article, we will discuss what a quick ratio tells you, evaluate if a quick ratio of 2 is good, explore what a 2 to 1 quick ratio means, and ascertain what constitutes a good or bad quick ratio.

Debt Ratio

Debt Ratio: Understanding and Evaluating Financial Health

When assessing the financial health of a company or an individual, one crucial financial metric to consider is the debt ratio. The debt ratio, also known as the debt-to-assets ratio, provides valuable insights into the proportion of debt a business has in relation to its total assets.

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