WWII 065: 15 Financial Statement Red Flags, Stocks with Revoked Registration, Tesla Valuation, Jay Z's $850 Champagne
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Main Topic: 15 Financial Statement Red Flags
In this episode, I shine the light on fifteen financial statement red flags to look out for when analyzing a potential investment. Listen to the episode to hear my explanation behind each of these fifteen:
1. Earnings track record poor
2. High return on equity and no free cash flow
3. Declining free cash flow
4. Constant “non-recurring” charges
5. Constant inventory write-downs
6. Declining gross margins
7. Depreciation much higher than capital expenditures
8. Slowing of collecting of receivables - DSO
9. Climb in inventory, especially if obsolescence is a problem.
10.Increasing debt/equity ratio but flat or declining ROE
11.Increasing number of shares outstanding but flat earnings per share
12.Margins less than industry average (poor management)
13.Unsustainable dividend payout ratio
14.No dividend and low ROE
15. High Debt to FCF (will take longer to pay off)
Ask JB: Why is Tesla stock selling at such a rich price?
submitted 22 hours ago by dagnels
JB Says: I / we don’t own Tesla stock, but I have shorted it successfully in the past, and may again in the near future. I’m a fan of the company and its product, not to mention that Elon is a fun guy to follow. What I have an issue with is the valuation of the company. It’s currently valued as if nothing will ever go wrong with the company and everything works out optimally. Nothing works out optimally so what makes Tesla investors think that they have discovered the one company that will?
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