A good company and a good investment are different questions. This framework helps you organise the evidence before forming a view.
Start with the business
Explain in plain language what the company sells, who pays it and what could weaken demand. Read the annual report and segment notes. Separate recurring operations from one-off gains. Record the reporting period so comparisons use the same basis.
Connect profits to cash
Read the income statement, balance sheet and cash-flow statement together. Check whether operating cash generation supports reported profit, and whether rising receivables or inventory need an explanation. Compare trends over several reporting periods rather than relying on one quarter.
Check resilience before growth
Examine borrowings, repayment dates and interest costs alongside available cash. Financial ratios need context: banks, manufacturers and software businesses do not have interchangeable balance sheets. A ratio alone cannot establish that a business is safe.
Make valuation assumptions visible
Write down the growth and profitability assumptions behind a valuation. Compare businesses with similar economics, and consider a range of outcomes. A low price-to-earnings multiple can reflect risks; a high multiple can leave little room for disappointment. Neither is a buy or sell instruction.
Keep an evidence trail
Save the filing date, page reference and calculation for each material observation. Separate reported facts, your assumptions and unanswered questions. Revisit the note when results or the business change. This is an educational checklist, not a stock rating system.