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(DCA = Durable
Comments
Competitive Advantage)
>40% = D.C.A.
Consistency is Key
Gross Profit Margin
< 40% = competition eroding
margins
< 20% = no sustainable
competitive
advantage
< 30% is fantastic
Consistency is Key
SG&A
Nearing 100% is in highly
(SGA as % of gross profit)
competitive
industry
Company with moat tend to
Depreciation
have lower %
(depreciation costs as a %
of gross profit)
Durable competitive
Company with lowest ratio of
Interest Expenses
advantages carry little
interest to Operating
(interest expenses relative to
or
no
interest
expense.
Income
= competitive advantage.
operating income)
Buffetts favorite consumer
Varies widely between
products have
industries.
<15%
Net earnings history >20% = consistency and upward LT trend
Net Earnings
Long Term
(% net earnings to total
moat
revenues)
< 10% = in highly
competitive business
10-year period showing
Consistency = sign products
EPS
consistency and
dont need to change.
upward trend.
Upward trend = strong
Avoid erratic earnings
pictures.
(DCA = Durable
Competitive Advantage)
lots of cash and marketable
securities + little debt
Comments
Total Liabilities +
Treasury Share-Adjusted
debt to Shareholder Eq
Ratio
Preferred + Common
Stock
Retained Earnings
Treasury Stock
Return on Shareholder
equity
Capital
Expenditures
Stock Buybacks
Comments
Add up total cap exp for ten-yr
period and compare
w/ total net earnings over
period.
Look at cash from investment
activities. Issuance
(Retirement) of Stock, Net