This is something I follow not necessary its the best way.
- Check for red flags in a company by running google searches and also checking the valuepickr thread for any potential red flags like any past legal cases on the company or any shortchanging of minorities.
- Understand the business model – You need to understand how does the company generate the revenue (What are the revenue streams – Geographically, segmentally or also product wise etc). What are the costs which a business incurs to bring this revenue. I make a value chain to understand any business where on the left I have supply side and on the right is the demand side.
Something like this
- Industry – Understand how is the industry structure, size and players.
- What is the X factor or moat in the business.
- Understand the management and how are they (Check management in terms of integrity and competence)
- What are the potential risks the biz can face and are you comfortable with those?
- Once everything is done ask yourself if this is a business you would like to own if answer is yes you may go ahead and do modelling and valuations.
| Subscribe To Our Free Newsletter |
