Management Summary
One can gauge the quality of a management team by plotting and examining financial data. History tends to repeat itself, so look to the past to predict what will happen in the future. The key management parameters, suitable values, and where the data can be obtained are summarized in the following table:
|
Management
parameters |
Suitable
values |
Where
can this data be found |
|
Past sales/share growth |
more than 20% |
must calculate it (obtain data
from Value Line) |
|
Past earnings growth (EPS) |
more than 20% |
must calculate it (obtain data
from Value Line) |
|
Future 3-5 year EPS growth |
more than 20% |
Value Line |
|
Share price has doubled in last
5-years |
At least 1.0 |
must calculate it (obtain data
from Value Line) |
|
Consistent pre-tax profit margin |
compare to competition |
must calculate it (obtain data
from Value Line) |
|
Consistent return on share holders
equity (ROE) |
at least 10% |
online, Value Line) |
|
Insiders hold a significant
portion of the outstanding shares |
5-15% (function of market cap and
age) |
online (siliconinvestor.com),
Value Line |
Companies that have not done well in the past can do well in the future. These are called turnaround stocks. Investing in these stocks is tricky business. They do not have a record of beating the competition, so you have to base your decision on what the management team is promising not what they have done. Talk is cheap. Kicking the pants off the competition over the last five years is no easy task.
There are few well-managed public companies. Do not invest in companies that do not meet or exceed the management criteria outlined here. Remember, the most important intangible asset a company has is its management team. Most of the motivated management teams are found in relatively young small-cap companies.
 |
|
| Previous |
Next |
| (page 28 of 34) | |
