Is This Stock Good?

The most important of the Big Five. Measures how efficiently management turns capital into profit. A consistent ROIC ≥ 10% over many years is the clearest signal of a durable competitive advantage — a moat worth protecting. Calculated using NOPAT divided by invested capital (Total Assets − Accounts Payable).

The CAGR of diluted earnings per share. Growing EPS means the business is compounding real profit for shareholders over time. Target ≥ 10% per year.

Revenue growth per share — confirming the company is winning more customers without diluting shareholders. Consistent growth supports the earnings story. Target ≥ 10% per year.

The CAGR of book value per share — net assets per share after all liabilities. Steady growth in BVPS shows the company is accumulating intrinsic value year over year. Target ≥ 10% per year.

The CAGR of free cash flow per share — what's left after running the business and maintaining its assets. This is the cash an owner actually takes home. Growing FCF per share is one of the clearest signs of a healthy, self-funding business. Target ≥ 10% per year.

Compares total debt to shareholder equity. A lower ratio means the company relies less on borrowed money. Rule of thumb: below 0.5 is conservative; above 1.0 warrants scrutiny.

Long-term debt from the most recent balance sheet. High debt is not always a red flag — what matters is whether the business can comfortably service it from its free cash flow. See Debt Payoff Time below.

Cash generated by the business after all operating costs and capital expenditures. This is the money available to pay down debt, return to shareholders, or reinvest for growth. Shown as the most recent annual figure.

How many years the company would need — at its current FCF — to retire all long-term debt. Phil Town's guideline: ≤ 3 years is healthy; above 3 requires justification. Rule #1 Investing, chapter 7.

The estimated fair value of the stock today. Projects future EPS using the expected growth rate and a conservative future P/E, then discounts that future value back to the present at 15% per year over 10 years. Rule #1 Investing, chapter 9.

The buy price that gives a 50% cushion below the sticker price. This protects against estimation errors and unforeseen risks. Rule #1: never pay more than the MOS price for a stock you intend to hold long-term.

The live market price. Compare it to the MOS price — if current price is below MOS, the stock may be on sale. If it's above the sticker price, the market may already be pricing in future growth.

Average number of shares traded per day. Phil Town's guideline: at least 500,000 shares/day (1,000,000 if price is under $1). This ensures you can enter and exit a full position within a single trading day without moving the market.

The maximum position size that keeps your trade under 1% of average daily dollar volume. Owning more than 1% of a day's trading means you'd need multiple days to exit — creating price impact and execution risk. Rule #1 Investing, chapter 15.