Being a stockholder is being a partial owner of a company.
Over the long term, a company's business performance and its stock price will converge.
The market rewards companies that earn high returns on capital over a long period.
Companies that earn low returns may get an occasional bounce in the short term, but their long-term performance will be just as miserable as their returns on capital.
The wealth a company creates - as measured by returns on capital - will find its way to shareholders over the long term in the form of dividends or stock appreciation.
My favourite financial ratios: ROA, ROE and ROIC.
Over the long term, a company's business performance and its stock price will converge.
The market rewards companies that earn high returns on capital over a long period.
Companies that earn low returns may get an occasional bounce in the short term, but their long-term performance will be just as miserable as their returns on capital.
The wealth a company creates - as measured by returns on capital - will find its way to shareholders over the long term in the form of dividends or stock appreciation.
My favourite financial ratios: ROA, ROE and ROIC.
No comments:
Post a Comment