I would like to make
a summary on how I shortlist potential companies based on financial report.
Shortlist means eliminate companies which do not fulfill the requirement.
1 Valuation
For bull market
third period
Dragon Head of
industry: PE<25
Second and third
line company: PE< PE of Dragon Head-5
Penny Stock: PE<
PE of Dragon Head-10
2 Profitability
There are three
options:
Revenue increases
and Profit Margin constants or
Revenue constants
and Profit Margin increases or
Both Revenue and
Profit Margin increase.
(Non-recurring item
and one-time profit should be excluded)
3 Cash Flow
There are two
options:
Net Cash Flow
positive and increase or
Net Cash Flow
positive and decrease (used in long term investment or paying debt)
4 Liquidity
Current Ratio more
than 2
Quick Ratio more
than 1
5 Take note any
sudden large changes of numbers in any particular section in financial report
comparing across year. (Find out the reason)
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