The combined return from price appreciation and dividends over the past year. This is what shareholders actually received. Compare to the S&P 500 for context. Strong fundamentals with poor returns may signal a buying opportunity.
Formula
Description
The combined return from price appreciation and dividends over the past year. This is the complete measure of what shareholders actually received. Comparing total return to the broader market shows whether the stock outperformed or underperformed.
Interpretation
Above 10% is solid on an absolute basis. Compare to the S&P 500 return for context. Strong fundamentals with poor 1Y returns may indicate a buying opportunity (if the weakness is temporary). Consistently strong returns with deteriorating fundamentals is a warning.
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Overhead costs (selling, general, and administrative expenses) as a percentage of revenue. Below 30% is generally efficient. Buffett notes that companies with consistently low SGA ratios tend to have durable competitive advantages.
Research and development spending as a percentage of revenue. The ideal range depends on industry: tech companies often spend 15-25%. Too little may mean underinvestment in the future; too much may burden profitability.
Total operating expenses divided by revenue. Below 0.8 indicates a healthy 20%+ operating margin. Above 1.0 means the company isn't covering operating costs with revenue. A declining ratio signals improving efficiency.
Total revenue divided by employee headcount. Measures workforce productivity and business scalability. Technology companies with platform models tend to lead. Above $300,000 is generally strong.
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