How to analyse a company

Start with the business

Before metrics, explain the company in one sentence: who the customer is, which problem it solves, and how it gets paid. If the model is not understandable, a detailed spreadsheet does not remove that gap.

Economic quality

Study organic growth, margins, customer retention, pricing power, and the capital needed to grow. Compare several years and competitors. A high margin may reflect a durable advantage or merely a cyclical peak.

Balance sheet and cash

Read the income statement, balance sheet, and cash-flow statement together. Debt, maturities, dilution, and off-balance-sheet commitments can make earnings fragile. Compare net income with free cash flow and explain persistent differences.

Management and incentives

Assess reinvestment, acquisitions, buybacks, and dividends. Clear communication includes mistakes and trade-offs; it is not built only on favourable adjusted targets. Review pay and ownership without assuming one metric proves alignment.

Value and price

A good company can be a poor investment at an excessive price. Build cautious, base, and optimistic scenarios for revenue, margins, and capital needs. Use multiples and cash flows as complementary perspectives, not automatic answers.

Checklist

• competitive advantage and threats;
• customer or supplier concentration;
• debt and capital needs;
• accounting quality;
• valuation and room for error.

Common mistakes

Falling in love with a story, selecting only favourable metrics, and rewriting a thesis whenever the price falls prevent learning. Write down in advance what would invalidate the thesis and monitor those signals.

Build a research note

Analysis becomes more useful when it can be checked later. Summarise the business, key revenue drivers, cost structure, and uses of capital. Record the source and date for figures; mixing fiscal years, currencies, or adjusted metrics can create misleading comparisons.

Separate facts, estimates, and judgements. “Margin was 18%” is a historical fact. “It may reach 22%” is an estimate. “The advantage is durable” is a judgement requiring evidence. This distinction shows where the thesis is most vulnerable.

Build at least three scenarios and identify the assumptions that move value most. Forecasting every quarter is unnecessary: the aim is to understand which variables drive the outcome and which combination is already implied by the price.

Signals to monitor

• organic revenue and margin development;
• conversion of earnings into cash;
• debt, maturities, and dilution;
• returns on incremental capital;
• customer and competitor behaviour;
• management’s capital allocation.

Track whether new results strengthen the business quality and assumptions in the analysis. Revise estimated value only when those facts change, not to mirror the share price.

Apply it in Azimute

Use the areas linked to this article to organise information and compare periods. A written record makes questions explicit; it does not replace analysis or turn an estimate into certainty.

Next step

Go deeper into business quality, then test how that quality appears in free cash flow.