COLGATE PALMOLIVE | Consistently Performing Businesses #4
Price vs Fundamentals over the last 20 Quarters
In this series of consistently performing businesses, we will look at the key fundamental statistics of COLGATE PALMOLIVE and how it has changed over the last 20 Quarters.
Now, why do we do this? Here is a take from some of the greatest investors.
"Over the long term, it's hard for a stock to earn a much better return than the business which underlies it earns." - Charlie Munger
"The best companies tend to increase their earnings over time, and the stock prices eventually follow." - William J. O'Neil
"I think you have to learn that there's a company behind every stock and that there's only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies."- Peter Lynch
Key Fundamental Statistics include:
Revenue TTM: It stands for "Revenue Trailing Twelve Months." It's a metric used to analyse a company's performance by calculating the total revenue generated over the preceding twelve months. We use it to remove any quarterly/semi-annual seasonalities associated with the business.
Operating Profit TTM: It is the sum of operating profit generated over the previous 12 months.
Operating Profit Margin (OPM)% = Operating Profit/Revenue expressed as %
ROIC%: ROIC stands for "Return on Invested Capital”. ROIC indicates how well a company is utilising its Capital to generate profits.
ROIC = Net Operating Profit After Tax (NOPAT) / Invested Capital
If a company can grow its Revenues and Profits maintaining its operating margin and return on capital, it is indicative of a good past performance and a stable footing.
Points to Remember
There are 2 parts to Fundamental Analysis. How the company has executed in the Past and how well it is placed for the Future. When we look at the data points as presented in the chart above, we mostly see the past and recent performances. It is like a rear-view mirror. It is not indicative of future performance.
One needs to keep track of the company’s performance periodically and keep updating the above chart.
We will be adding the list of consistently performing businesses periodically in Finvezto Compass.
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