AMA The Fifth Person
Asked by Anonymous
Updated on 18 Apr 2019
I would pay attention to a company's cashflows. I believe that cashflow is king for any company and it is the main driver of value in a company. I will probably focus my attention on a company's cashflow statements, with particular emphasis on the Operating Cashflows.
Operating cashflows measures the cashflow produced by the company's normal operating activities on a regular basis. This includes activities such as selling their products or services, buying inventory, paying their staff, rent and other expenses etc.
An important portion of the Operating Cashflow is the change in working capital that a company has. Basically, a company's cashflow can be affected by changes by some of its working capital policies. For example, most companies can sell on credit terms. This means that they can sell a product or service but the customer paying them only needs to pay cash after a period of time (usually in brackets of 30, 45, 60 and even 90 days). This means that a company can sell a lot of products or service, but the company's cashflow may only be coming in later on. Companies can also buy inventory but pay their suppliers later on too, which can help improve a company's cashflow
Personally, I have seen companies who have face deep trouble because their cashflows have not been managed well, yet have good amount of revenue, because their working capital polices / circumstance isn't strong.
Hello! Here are some things you can look out for, hope it helps!
Firstly, it is important to consider the company's financial fundamentals which includes their earnings, operating marginfs and cash flow. These will give you a better idea of the company's financial health and its profitability in both the short and long run.
Next, you can consider the company's favorable asset utilization. This means the ratio of the revenue earned for each dollar of assets it owns. This can help to measure the company's efficiency over time.
Thirdly, it is important to look at how a company funds its business operations using both debt and equity.
You can also look at the earning momentum of the compant. This means looking at the slowing or acceleration of earnings growth from one period to the next, this can be demonstrated by patterns.
To invest in Asia companies, the most important factor is to look at the business and management because investing in Asia can be dangerous if you focus just on numbers as there are many high profile cases where the financials cannot be trusted.
volume - High volume stocks must be chosen.
volatility - Choose a stock that moves 0.5% to 2% per day.
trends - Look for stocks which have a tendency to trend.
You can use stock screener to check for all of the above listed characteristics.