The Profit & Loss statement is the most-read document in equity research. Yet most investors only look at one number - the bottom line. Here is how to read the whole story, from Revenue down to Net Profit, and what each layer reveals.
The balance sheet is a snapshot of everything a company owns and owes at a specific point in time. Understanding it lets you assess financial strength, debt sustainability, and how efficiently a business deploys capital.
Earnings Per Share is the most referenced metric in equity markets. Every earnings announcement revolves around it. Yet EPS is also one of the most easily manipulated numbers in finance.
The P/E ratio is the first number most investors look at when assessing a stock. It is also the number most often misread. Understanding what P/E truly measures is foundational to sensible equity valuation.
Accounting profit can be managed. Cash cannot be faked. Free Cash Flow is the ultimate measure of a business's ability to generate real economic value - and the foundation of every rigorous valuation methodology.
Benjamin Graham devoted the final chapter of The Intelligent Investor - his life's work - to three words: Margin of Safety. It remains the most important concept in value investing, and the one most consistently ignored during bull markets.
In eight paragraphs of Chapter 8 of The Intelligent Investor, Graham created the most important mental model in investing. Mr. Market explains why daily price movements are irrelevant to the long-term investor - and occasionally, enormously useful.
In Chapter 14 of The Intelligent Investor, Graham set out seven specific, measurable criteria for stock selection by the defensive investor. These are not rules of thumb - they are a complete, backtested framework designed to identify financially sound businesses trading at reasonable prices.