Everyone should read McKinsey's Valuation textbook and Value; the four cornerstones of corporate finance. These two books taught me more about business and investing than any other.
Thank you so much for actually explaining this without repeating yourself 5 times and saying the same phrase over and over again just stated differently.
2:16 “if you want the interest RATE to increase, put in more money…” No. The interest RATE would remain the same., but the interest earned would indeed increase.
Thank you for the concise and clear explanations. I have the following question. When it comes to comparing ratios year over year, isn't it practically the same to compare ROE and EPS? They both show profitability of your investment (i.e your shares). The formulas: * Return on Equity = net income / total equity * Earnings per share = (net income - dividends) / outstanding common shares To increase capital (consisting of debt and equity) without taking on more debt, the company needs to increase equity (i.e., issue more shares). Therefore, EPS will likely be affected proportionally.
Good question. ROE can be distorted by stock buybacks because they shrink equity. Issuing debt does too. EPS can be boosted by debt, which wouldn’t show up. This is why you need to look at total capital employed, not just equity. Hence why ROE & EPS alone are inadequate
Finance 101 🙂 At my uni in the '80s (Erasmus Rotterdam, Netherlands), this was called ROI for Return On Investment. Don't recall exactly the then preferred calculation of this ratio, but obviously it needed to (generously) exceed the returns one can have 'risk free'. Which in those days, before all central banks went banana's with their helicopter money , was an awful lot higher than today! (the return that is, not the risk).
For the sake of simplicity, I get the savings account analogy. In a business though it's not as simple of just putting more money in and you get the same return guaranteed. That's actually THE challenge every business faces: reinvesting capital at high returns over the long run.
Yup, you are correct. But the idea here is to get people to understand that businesses, investor, capital and earn a rate of return….that’s not an easy concept to understand.
I just use the formula Net Income / (Equity + Debt). I know that it is not "correct", because it will give higher ratios for companies that don't have debt. But I would say it is a good bias.
Thanks for the checklist. May I ask what is your opinion on Joel greenblatt ‘magic formula’ of looking and ranking both the ROE and rate of return metrics together to select a company stock. His Gotham fund has yielded a 40% per annum return.
plz use darker/gray/dark sepia background on your slides, instead of bright white; as most of us are now shifting towards dark mode, to protect against the destructive blue light that kills our brain.
@@BrianFeroldiYT sure! I downloaded the graphic, it’s good! Can you make a playlist out of it, where you discuss each point in the list with buffet resources?
▼WARREN BUFFETT CHECKLIST INFOGRAPHIC:▼
LongTermMindset.co/BuffettChecklist
Everyone should read McKinsey's Valuation textbook and Value; the four cornerstones of corporate finance. These two books taught me more about business and investing than any other.
Both great reads
Thank you so much for actually explaining this without repeating yourself 5 times and saying the same phrase over and over again just stated differently.
Is that something we've done before?
Explained very simply and clearly-easy to understand!
Glad it was useful!
2:16 “if you want the interest RATE to increase, put in more money…” No. The interest RATE would remain the same., but the interest earned would indeed increase.
Yup. You are correct.
@@BrianFeroldiYT - Interest Amount vs Interest Rate!
These videos you produce a such a blessing! They are very useful and relevant. Thank you kindly!
Glad you like them!
Thank you for the concise and clear explanations.
I have the following question.
When it comes to comparing ratios year over year, isn't it practically the same to compare ROE and EPS?
They both show profitability of your investment (i.e your shares).
The formulas:
* Return on Equity = net income / total equity
* Earnings per share = (net income - dividends) / outstanding common shares
To increase capital (consisting of debt and equity) without taking on more debt, the company needs to increase equity (i.e., issue more shares). Therefore, EPS will likely be affected proportionally.
Good question. ROE can be distorted by stock buybacks because they shrink equity. Issuing debt does too. EPS can be boosted by debt, which wouldn’t show up. This is why you need to look at total capital employed, not just equity. Hence why ROE & EPS alone are inadequate
Finance 101 🙂 At my uni in the '80s (Erasmus Rotterdam, Netherlands), this was called ROI for Return On Investment. Don't recall exactly the then preferred calculation of this ratio, but obviously it needed to (generously) exceed the returns one can have 'risk free'. Which in those days, before all central banks went banana's with their helicopter money , was an awful lot higher than today! (the return that is, not the risk).
Thanks for pointing out the hidden risks of using tech.
Sure thing
High quality content ! Great job
Much appreciated!
Man I love you!! I was second guessing my research paper on this topic for class and this just made me super excited. Your video is appreciated!!!
I'm so glad!
I'm a newbie, learning from the best. Muchas gracias
Welcome!
Great video 😊 I hope yoh make videos about the middle of the Buffett checlist which is management. That is a more difficult area to figure out..
We have….. but those videos bombed.
@BrianFeroldiYT what do you mean by bombed? Ate they still available? Please send the link?
thx :)
For the sake of simplicity, I get the savings account analogy. In a business though it's not as simple of just putting more money in and you get the same return guaranteed. That's actually THE challenge every business faces: reinvesting capital at high returns over the long run.
Yup, you are correct. But the idea here is to get people to understand that businesses, investor, capital and earn a rate of return….that’s not an easy concept to understand.
what a underrated channel
Thanks so much for that :)
Im doing my jpb thks
Great video
Thanks!
Hello, can I ask what program you use? Thank You
Finchat.io/brian
A typo at 4:59 - EBIT earnings before interest in Texas :)
EBIT : "Earnings Before Interest (&) Taxes"
"In Texas?" WTF? And it's in his graphic too! Looks like he needs his Ears & Eyes Checked! 🧐😲😆😂
Warren Buffett is government front man He talks with coded tongue you like action this is the guy
I just use the formula Net Income / (Equity + Debt). I know that it is not "correct", because it will give higher ratios for companies that don't have debt. But I would say it is a good bias.
Sure. A decent proxy.
your videos are great! Well done
Thank you very much!
Thanks for the checklist. May I ask what is your opinion on Joel greenblatt ‘magic formula’ of looking and ranking both the ROE and rate of return metrics together to select a company stock. His Gotham fund has yielded a 40% per annum return.
I like the idea of his magic formula, but I don’t think it’s as useful as it once was
Amazing …learned a new concept.. thanks
Glad it was helpful!
Hey Brian, so ROC is the same matric t like ROIC or is it something diffrent. THANKS
ROC doesnt include the depreciation and amortization
@@MeBee-fl2ow Thank you for the anser.
Different. There are many different ways to calculate returns on capital
Great Brian 👍
Glad you enjoyed it
Basically working capital depend on markets favorable environment
Excellent Brian!
Glad you liked it!
Awesome video 🎉
Thank you 😁
Shouldn't FCF (free cash flow) be the primary metric?
Its a good one
Great video.
Glad you enjoyed it
plz use darker/gray/dark sepia background on your slides, instead of bright white; as most of us are now shifting towards dark mode, to protect against the destructive blue light that kills our brain.
Good feedback
❤
:)
ebit (earnings before interest in texas? is it suppoed to say texas. idk. only in texas i guess
Lol. I saw that too. He meant taxes.
Yup -- taxes.
Typo in bullet point no. 7: Ca instead of can
Thanks for the eagle eye!
@@BrianFeroldiYT sure! I downloaded the graphic, it’s good! Can you make a playlist out of it, where you discuss each point in the list with buffet resources?
Dear Brian, another question - what means if the long term debt is negative over some period ( 3-4 years)
Long-term debt can't be negative.
@@BrianFeroldiYT Unum Group Long Term Debt Repaid , its negative, sorry
EBIT="earnings before interest in Texas"?
:)
How about that ratio EBIT (Earnings before Interest in Texas)? That must be some kind of American thing
Sure is
ブライアンさんが最もポジションを取っている個別株はなんですか？
Mercado Libre, google and MasterCard
@@BrianFeroldiYT 固定資産をあまり持たず利益を増やしている優良企業ですね。
参考になります
I love japonese females
@@jankay8569 俺は毎日日本女性に囲まれている。おれは恵まれているのか
Why does yahoo finance not have these ratios?
They have some of them, but finchat.io is way better
why banks is much lower return on capital related to other industries?
Because their capital base is so much larger. these metrics don’t work as well on banks. The key metric to watch there is return on assets.
Why are you subtracting tax from NOPAT If it’s after tax?
You are correct - NOPAT is after tax
EARNINGS BEFORE INTEREST IN TEXAS
Dont mess with Texas
Lol
Missing WACC, but in general a simple explanation
I'll have a video about WACC in the new few months
@@BrianFeroldiYT I just meant, that a short note "minus WACC" it generates shareholder value. but great, if you cover WACC in the future.
free cash flow from operations
Did you really say "1939 letter to shareholders"?
🙂😍😍🙂
I would love a video about the epic comeback of Carvana stock. ~4000% return to date from its low in Jan 2023.
Wow, had no clue it was up that much
this is a one size fits all analysis. amusing but not universal.
Great!!!
Thanks for watching!
@@BrianFeroldiYT very usefull and Main Thing is, that is explained with a simple words) 😉
Thanks a lot again!!!
He just want to get more capital from investors...😂
when you make youtube videos, im not sure youre in a place to criticize the methods of one of the best fundamentals investors
Did you watch the video?