Breaking Down a Company Cheat Sheet Updated for 2025-2026 Investment Models Created By: Stock Market Charlie | Updated: November 2025

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Breaking Down a Company Cheat Sheet Updated for 2025-2026 Investment Models Created By Sto.

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As promised, I am pleased to present the newly revised and updated version of the "Breaking Down a Company Cheat Sheet." This comprehensive guide is designed specifically for investors who are keen on delving into the intricacies of fundamental analysis of a business's financial statements. In the world of investing, understanding the key metrics is crucial for making informed decisions that can significantly impact your financial future. Within the attached document, I have meticulously outlined every essential aspect an investor needs to research when contemplating investment opportunities. This includes various financial ratios, performance indicators, and market trends that can provide deeper insights into a company's operational health and growth potential. Each metric has been carefully selected to help you gauge the overall performance of a business and its ability to generate profits in the long run. Additionally, I have included a valuable resource that I frequently utilize in my research endeavors: the website gurufocus.com. This platform offers a wealth of information, including detailed financial statements, historical data, and expert analyses. It serves as an indispensable tool for conducting thorough fundamental analysis of all the businesses I choose to invest in. The insights gained from such a resource can empower you to make more strategic and calculated investment choices. Moreover, conducting diligent research on your investments cannot be overstated. It is vital to ensure that you are making informed decisions based on solid data and analysis rather than speculation or hearsay. A well-researched investment is more likely to yield positive returns, while a lack of due diligence can lead to significant financial losses. This cheat sheet aims to streamline your research process, allowing you to focus on the most critical elements that can influence your investment outcomes. Here is a detailed breakdown of what my latest cheat sheet includes: - **Key Financial Ratios**: This section covers liquidity ratios, profitability ratios, and leverage ratios, providing a clear picture of a company's financial health. - **Earnings Trends**: An analysis of earnings growth over time can reveal patterns that are indicative of a company's future performance. - **Cash Flow Analysis**: Understanding cash flow is essential, as it reflects the actual liquidity of a business, which is crucial for its operations. - **Valuation Metrics**: This includes Price-to-Earnings (P/E) ratios, Price-to-Book (P/B) ratios, and other valuation methods to assess whether a stock is overvalued or undervalued. - **Market Position and Competitive Advantage**: Evaluating a company's market share and competitive edge can provide insights into its sustainability and growth potential. - **Management Quality**: Analyzing the leadership and management practices of a company can give investors a sense of its strategic direction and operational effectiveness. Always remember, if you do not come from a wealthy family, it is essential to ensure that a wealthy family comes from you. This mindset emphasizes the importance of financial literacy, strategic investing, and the power of informed decision-making in building wealth over time. By using the insights and tools provided in this cheat sheet, you can take proactive steps towards securing your financial future through smart investment practices.

📊 Financial Strength

• ROIC vs WACC: Critical in 2025–2026 due to high interest rates. Target: ROIC > 15%, WACC < 10–12%, with at least a 5% spread.

• Key Ratios: Cash-to-debt, equity-to-asset, interest coverage, and operational cash flow are emphasized.

• Competitive Moat: Sustained ROIC-WACC spread signals strong value creation.

💰 Profitability

• Healthy ROE above 15% is vital.

• Focus on gross, operating, net, and free cash flow margins.

• Efficient capital allocation matters more under tighter credit conditions.

📈 Momentum

• Track RSI, 50-day and 200-day moving averages.

• Compare relative strength against sector indices to spot outperformers.

🔍 Valuation

• PEG ratio under 1.5 may signal undervaluation in growth stocks.

• Price-to-book below 1.5 with strong ROE suggests undervaluation in asset-heavy sectors.

🚀 Growth

• Consistent 3-year revenue growth and improving margins are key signals.

• EPS growth rate and forward revenue estimates are critical.

💵 Dividends & Buybacks

• Stable or decreasing share counts show shareholder-friendly capital allocation.

• Dividend yield and growth rate are tracked alongside buyback activity.

💸 Free Cash Flow

• FCF yield above 5% is preferred.

• Strong FCF-to-net income conversion (80%+) indicates high-quality earnings.

📑 Balance Sheet & Liquidity

• Target debt-to-equity under 1.0 unless cash generation is very strong.

• Current ratio > 1.5 and quick ratio > 1.0 provide safety buffers.

🌍 Market Context (2025–2026)

• Themes: Higher-for-longer interest rates, AI-driven efficiency, local-for-local investing, convergence of public/private markets, and mainstreaming of active ETFs.

• Focus Areas: Companies with fortress balance sheets, sustainable ROIC-WACC spreads, and proven cash generation will outperform.

Best Regards,

Stock Market Charlie