Financial Analysis is breaking down the financial report and make interpretations from it – honestly, this is the most boring activity in investing (but we promise you, you won’t see boring posts under this category here). But the investor has no choice. Analyzing financial reports make investor get closer to valuation.
The Big Picture
Four mantras in investing are: Find durable business, find a business with a high return on invested capital, Don’t pay too much, verify periodically.
Our first post’s category is Competitive Advantage – it deals with the first mantra: Finding durable business. This – Financial Analysis category – deals with the second: Finding companies with a high return on invested capital.
Our article under financial analysis parent will cover earnings in detail. It will cover the business model, segment contribution, and how could it grow (or not) in the next foreseeable future. Our earning analysis will be incorporated with Cash Flow Analysis as justification of that earnings. In some cases, earning is just a record – not materialized in cash, and we don’t like that.
Moreover, We will also cover the balance sheet since it provides us insight into the management track record, financial resilience against bad circumstances, management stewardship, and company strategy.
We hope our financial analysis will provide a storyline of a company – you don’t see it as a number. It beyond the number, the financial report, year by year, will provide a history of the company – how good the strategy is, how many bad decisions made, how management treats shareholders.
The key point of the fundamental analysis of Starbucks
Reckless buyback is the factor why we do not buy Starbucks.
We are happy when Howard Schultz takes the Starbucks helmet and decides to suspend that buyback program.
But when he said that the suspension is just a pause (Schultz wants to resume the repurchase program) We worry that this pause is just lip service to calm the Starbucks worker.
Revenue and earnings have surpassed the pre-COVID level. It is a good sign.
Starbucks has a decent competitive advantage in its brand. It creates a unique user experience – also a story. Something that almost no other ” restaurant” could replicate. Even with its mediocre coffee.
Our takeaways for Disney Stock Analysis 2022, begin with the pros:
Sticky customer, kids watch Disney again and again. Come to its park every holiday.
Theme Park shows significant improvement. We believe this year it will achieve its pre-COVID performance. Another good news is Disney keeps enhancing its places. Elaborate later.
Though till now Disney+ still burning cash to run its business, the ad-supported content will be the game changer (unlike Netflix). Disney’s content is specific, family-friendly, and targeted. It is good for a third party to access Disney viewers. We will elaborate on this later.
Disney stock price is at COVID level (July 2022)
Disney runs an expensive business that needs a high amount of capital. Theme Park requires massive investment, even their digital content needs regular reinforcement like the Fox acquisition in 2017. Unfortunately, Disney’s balance sheet isn’t as spectacular as its magical story to handle all of that needs easily.
Management fails our expectations. Under though situation – the COVID – they prioritize themselves and leave shareholders.
Lack of tailwind. The key driver for growth is increasing Disneyland ticket or subscriber fees. Reaching more people is more difficult. Disney is simply not a fast grower company.
Ok, now going to the elaboration section. You can skip this post if you don’t want to go into further detail.
Oh, don’t worry – we keep this post updated regularly.
Nvidia stock falls from 300 level in November 2021 to half of its value at approximately 150 level in June 2022. Is this a rare opportunity or an alarming bell for the chip industry? We try to analyze its revenue, business model, and issue regarding the chip industry. In the end, we hope the investor could answer: Is Nvidia a bargain stock to buy?
In the last sequel of the Tesla episode, we know that Tesla has an impenetrable economic moat and promising earning power. But, with a sky-high valuation, is it worth buying? Our stock analysis of Tesla tries to shed the light.