Ten articles on what a business is worth
Short pieces on the arithmetic and the judgement behind an entry price. They are written to be read in order, but each one stands on its own. Nothing here is behind a sign-up.
Foundations
No accounting background neededValue and price are two different numbers
The quote on the screen is what one seller wants today. What the business is worth is a separate question with a separate answer — and the whole method lives in the gap between them.
02 4 min readMargin of safety: building for the load you did not plan for
Every valuation you will ever do is wrong by some amount. The margin of safety is not a way to earn more — it is the arrangement that lets you be wrong and still walk away whole.
03 4 min readROIC: a dollar goes in, how much comes back out?
Return on invested capital is the single number that tells you whether management turns capital into earnings or just consumes it. It is also the number most easily flattered by accounting.
05 4 min readReading a cash flow statement in thirty seconds
Three blocks, three signs. The combination of pluses and minuses tells you what kind of company you are looking at before you read a single figure.
07 4 min readThree models, one price: why you triangulate
Every valuation model is a set of assumptions wearing a number. Running three that fail in different directions tells you something no single model can: whether the answer is stable.
Going deeper
Assumes the foundationsFour growth rates, ten years, one question
Revenue, earnings, free cash flow and book value. Each one can be flattered on its own; the four together are hard to fake, which is exactly why you read them as a set.
06 4 min readOwner earnings: separating the spending that keeps you competitive
Free cash flow subtracts all capital expenditure, including the kind that builds a business you do not have yet. Owner earnings subtracts only what it costs to stay where you are.
08 4 min readCapitalisation rate: pricing a business the way you price a building
Borrowed from property, where nobody buys on a story. Fix the yield you require, divide the cash the asset throws off, and the price falls out — no growth forecast anywhere in it.
09 5 min readThe growth model, and the one input that controls it
Four inputs, four steps, and only one of them is a fact. Walking the model forwards is easy; the skill is in knowing how far the answer moves when you are wrong about the growth rate.
10 4 min readPayback time: how many years until the money comes back
Stop thinking of a share as a quote that moves and think of it as a machine that produces cash. Then the only question is how long the machine takes to hand back what you paid for it.
How to read these
The Foundations pieces assume nothing — no accounting, no spreadsheet. The ones under Going deeper assume you have read those, and they get specific about formulas and about where each formula breaks. If you only ever read two, read the first and the last: one tells you what you are looking for, the other tells you how to know when you have found it at a price worth paying.
What these are not
Teaching material, not recommendations. Every figure in every worked example is invented to make the arithmetic visible — none of it is a real company's filing, and nothing here says anything about any particular stock. The numbers are there to be followed with a pencil. Moatrics currently covers US-listed companies.
See how the four questions fit together