ValueMarkers

Would this rule have broken?

Each page below takes one named condition and one company, and reports the fiscal years the condition would have failed in, tested against every annual report we hold. The years are linked to the submissions they came from, so any verdict on any page can be checked against the filing in two clicks.

These are the eight figures whose history can be rebuilt with exactly the same arithmetic as the live value. Anything that needs a share price cannot be answered honestly this far back, and rather than answer it with a lookalike formula we do not publish it.

Return on equity stays at or above 15 percent

A convention, not an estimated boundary. Fifteen percent is a common quality screen; our own bands sit at 8, 12 and 20, anchored on a mature-market cost of capital near 8 percent.

Debt to equity stays at or below 1.0

Graham, The Intelligent Investor (revised edition, 1973), chapter 14, defensive-investor criteria.

The current ratio stays at or above 2.0

Graham, The Intelligent Investor (revised edition, 1973), chapter 14, defensive-investor criteria.

Gross margin stays at or above 40 percent

A convention, not an estimated boundary. No published threshold for a gross margin is defensible across industries, so this one is a line to test rather than a standard to meet.

Operating margin stays at or above 15 percent

A convention, not an estimated boundary. The figure is a line to test, and the page reports what it would have done.

  • Apple Inc. (AAPL)

    Held in all 10 fiscal years tested.

  • Costco Wholesale Corporation (COST)

    Would have broken in 10 of 10 fiscal years: FY2016, FY2017, FY2018, FY2019, FY2020, FY2021, FY2022, FY2023, FY2024, FY2025.

  • Walmart Inc. (WMT)

    Would have broken in 10 of 10 fiscal years: FY2017, FY2018, FY2019, FY2020, FY2021, FY2022, FY2023, FY2024, FY2025, FY2026.

Net margin stays at or above 10 percent

A convention, not an estimated boundary.

  • Apple Inc. (AAPL)

    Held in all 10 fiscal years tested.

  • Walmart Inc. (WMT)

    Would have broken in 10 of 10 fiscal years: FY2017, FY2018, FY2019, FY2020, FY2021, FY2022, FY2023, FY2024, FY2025, FY2026.

Free cash flow stays above zero

Definitional. Zero is the point at which the business consumed cash over the year rather than produced it.

Revenue grows by at least 5 percent a year

A convention, not an estimated boundary. Growth is compared between consecutive filed fiscal years, so the earliest year on file has no prior year and is never evaluated.

25 pages, on companies with ten or more filed fiscal years on record. A company we hold less than that for produces no page rather than a short one. Research, not advice.