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Behind every ticker is a business with three statements: what it sold, what it owns and owes, and where the cash actually went. Learn to read them and most "analysis" on the internet stops being intimidating.
Revenue (or "turnover", or "the top line") is everything the company sold before a single cost comes out. It's the starting number of the income statement and the least impressive one on its own.
Growing revenue while losing money is common and not automatically fatal. Growing losses faster than revenue usually is.
Revenue shows demand. It says nothing about whether the business keeps any of it.
Subtract the cost of making the product and you get gross profit. Subtract the cost of running the company — salaries, marketing, rent — and you're at operating profit (EBIT).
EBITDA is operating profit with depreciation and amortisation added back: Earnings Before Interest, Taxes, Depreciation and Amortisation. It's a rough proxy for the cash the operations throw off, which is why lenders love it.
Keep going — subtract interest on the debt and tax to the government — and you finally reach net income, the bottom line, the profit that actually belongs to shareholders.
EBITDA flatters companies that own expensive equipment or carry heavy debt, because it excludes exactly those costs. Useful, but never mistake it for profit.
A margin is just a profit line divided by revenue, expressed as a percentage. Gross margin after production costs, operating margin after running the company, net margin after everything.
Margins are how you compare a giant to a minnow fairly. They also reveal pricing power: a company that can raise prices without losing customers keeps fat, stable margins.
Rising revenue with falling margins means the growth is being bought rather than earned.
A snapshot on one day of what the company owns (assets), what it owes (liabilities), and what's left over for shareholders (equity). It always balances, by construction: assets = liabilities + equity.
Assets include cash, inventory, buildings and goodwill. Liabilities include debt, unpaid bills and future obligations. Equity is the residual — the bit that's genuinely yours as an owner.
If liabilities grow faster than assets, equity is being eaten from the inside.
Debt magnifies outcomes in both directions. Borrow to expand and it works brilliantly while sales grow; the same debt is what kills the company when sales fall, because interest doesn't care about your quarter.
Three ratios do most of the work. Debt-to-equity compares borrowed money against owners' money. Net debt to EBITDA answers "how many years of operating profit to clear the debt?". Interest coverage — operating profit divided by interest — asks whether the profits comfortably cover the payments.
What counts as "high" is sector-dependent: utilities and property carry debt comfortably, software companies generally shouldn't need to.
Interest coverage near 1 means every euro of profit is going to the lender. That's the number that ends companies.
Profit is an opinion shaped by accounting rules; cash is a fact. The cash flow statement tracks money genuinely entering and leaving the building.
Start with operating cash flow — cash from the actual business. Subtract capital expenditure (capex), the money spent on equipment and buildings, and you get free cash flow: what's left to pay dividends, repay debt or buy back shares.
A company reporting healthy profits while free cash flow stays negative deserves a hard look. It's one of the oldest tells there is.
Free cash flow = operating cash flow − capex. Profit can be massaged; cash eventually can't.
A multiple answers "how much am I paying per unit of something?". The famous one is the P/E ratio: share price divided by earnings per share. A share priced at 40 that earns 2 per share trades at a P/E of 20.
Read it as roughly how many years of today's earnings you're paying for. A high P/E isn't automatically expensive — it means the market expects growth. A low P/E isn't automatically a bargain — it often means the market expects trouble.
Alternatives fix specific blind spots. EV/EBITDA uses enterprise value (market cap plus net debt), so it compares companies fairly even when one is loaded with debt. P/B compares price to book value, mostly used for banks. P/S uses sales, for companies with no earnings yet.
Multiples only mean something in comparison — against the company's own history, or against direct competitors. Never in isolation.
Education, not advice. No rewards, no streaks — just fewer avoidable mistakes.