Finding the next multi-bagger by understanding operating expenses

As usual, we are going to use case studies to understand these concepts. Reported earnings of high growth companies are often misunderstood by investors. Current earnings do not equate to real earning power.

Companies that are growing rapidly often reinvest heavily and their earnings are distorted as a result.

Earnings are the reported numbers. But real earnings power reflects the ability of the company to earn high rates of return on capital and grow at a high clip.

Companies that are able to generate high returns on capital and grow rapidly often will enjoy a big share price increase from multiple expansion and earnings growth.

Steady Compounding

Thanks for reading! This is the newsletter update from Steady Compounding. The purpose of writing this blog is to organize my thoughts and further my learning. And hopefully, my experiences will be able to benefit readers as you develop your own investment process or framework to life.

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