And our definition of intrinsic value is the recent value of all the future cash flows to be generated from a business, so to that end, we strive to invest in companies with
high returns on equity number one, and number two, sustainable and predictable, above - average, long - term earnings growth rate.
Of course, the usual temptation here is to rely primarily
on quantitative analysis — let the
numbers do the talking — focusing
on the consistency & sustainability of strong free cash flow (as a % of net income),
high net margins,
high return on equity (though not dependent
on excessive debt), and good
return on assets (in excess of WACC).