The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market

P/S ratio useful for quickly valuing companies with highly variable earnings, by comparing the current P/S ratio with historical P/S ratios.

Smaller firms are generally riskier than larger firms because they’re more vulnerable to adverse events. They also usually have less diversified product lines and customer bases.

Look at the biographies of the board, which are also in the proxy statement. If many of them are closely related to top management—or are former managers themselves, it’s a good bet the board isn’t going to be as hard-nosed when questioning management’s actions as it could be.

you can use it to calculate an operating margin, which is fairly comparable across firms and across industries.

Accounts receivable (A/R)

Another way firms can make themselves look better is by changing any one of a number of assumptions in their financial statements. As a very general rule, you should look skeptically on any optional change—some accounting changes are mandated

there is no precise way to calculate the exact discount rate that you should use in a discounted cash flow (DCF)

short-term trading means that you’re playing a loser’s game. The costs really begin to add up—both the taxes and the brokerage costs—and

Being picky about valuation isn’t fun. It means letting many pitches go by and watching many stocks run—stocks that never met your strict valuation criteria. But when it’s done properly, disciplined valuation also greatly increases your batting average—the number of stocks you pick that do well versus the number that do poorly—and it also limits th