Nishal Desai
@nnd
Nishal Desai
@nnd
seeing how much $1 of net assets generates in earnings is the best indicator of evaluating a business.
in an asset light model, you can use intangible assets - like headcount, patents, etc.
how much earnings are you generating per $1 on net assets on the balance sheet
cash flow business with no growth — run by family type for ever
when spending is already high, the spender will find ways to keep spending
when spending is tight and constrained, spender will find ways to show restraint and curtail costs
if there are opportunities for high ROI investment at attractive costs, then earnings should be used to plow into the business — but if capital requirements are low for a business or track record of poor allocation of capital (low profitability) then earnings should be distributed as dividends or share repurchases
if management is 10/10 and operated efficiently, then why ever change what they are doing or try to take full control — if it ain’t broke, don’t fix it
attractive markets should keep being attacked with various approaches
not everything works
industry dynamics out of ones control will impact profits
don’t get ahead of yourself at the first signs of success. it takes several years to see success