Value investing · Course 8 of 39 · Judging a business
Industries that need their own ratios
Banks, insurers, REITs, utilities, energy producers, retailers and software companies each hide their economics where the generic ratios do not look.
For a reader who can read a typical company's accounts and has met one where the usual ratios stop working: a bank whose debt is its raw material, a REIT whose net income understates it, a producer whose margin depends on a price it does not set.
After it you can name the two or three measures each of these industries is actually read on, and the generic ratio (debt to equity, EV/EBITDA, net income) that misleads for each one.
It assumes Reading financial statements, Accounting quality and Financial health, and draws on Business models and moats and Quality and returns.
The test, not the verdict
Industries that need their own ratios is 7 lessons on the tests and where their lines sit. Whether a company you hold clears one of them is a separate question that needs its filings read, and nothing on these pages has read them.
See our methodology for how the product reads a filing and what it refuses to compute.