Financial Analysis
With the Inhance funds, our approach to financial analysis is rooted in a philosophy known as Growth at a Reasonable Price (GARP). In essence, we look for strong businesses with solid growth potential, and a share price that is reasonable relative to the company's earnings and the broad marketplace. We don't speculate, and we don't chase stocks into the stratosphere for the sake of risky, short-term gains.
Our financial analysis process takes place in parallel with our Environmental, Social & Governance (ESG) analysis, yielding a short list of investment candidates that possess what we believe are the right characteristics for long-term growth. Finally, we allocate the selected companies to broadly diversified portfolios, to further manage risk.
Business Evaluation
The first step of financial analysis is to determine whether the company is profitable, whether it has a competitive advantage, and whether it has a management team whose interests are aligned with those of the shareholders. At Inhance, some of the areas we examine include:
- Nature and competitiveness of the industry
- Strength of the business model
- Efficiency of the allocation of capital
- Track record of the management team
When a company is found to have a solid foundation and a bright future, the next step is to examine the relative value of the stock price.
Stock Valuation
At Inhance, we conduct detailed analysis in an effort to ensure we're always buying good companies at reasonable prices, based on factors such as:
- Rate and certainty of growth of earnings, free cash flow and dividends
- The potential for key financial metrics to improve in the future
- Review of historical stock valuations
- Reward versus risk analysis, based on projected valuations
Once we've identified a solid investment candidate from a financial perspective, we look at its social profile. Does the company meet our expectations in terms of being a great corporate citizen?
Be invested. In a better world.