Capital Signal: General Metrics insights edition

Good morning.

To continue the analysis of what makes up “good” companies (anything that has done a 300% in the last three years) I am going to begin with general metrics like P/S, EV/Revenue, Revenue Growth, Market Cap across the tags and market cap.
This will allow us to answer

The largest metric across all general metrics was company size which intuitively makes sense (its easier for a $30M company to become a $300M than $300M to $3B). However this is only a moderate correlation.

Across the different sectors we start to see a story play out with some strong correlations.

What we find is that within the Mining sector it actually matters less if you are making sales. I suppose this tracks with the broad makeup of winners within mining being more speculative plays as opposed to Tech where the key defining factor is fundamentally expansion and aggressively dominating a niche.

Within healthcare we have a deviation as well where the better performing companies tend to be larger, and be more correlated with a starting enterprise value than anything else. Perhaps achieving a moat is one of the driving factors.

Looking across the different metrics I also found that P/S and EV/Rev does not really matter.

Another strange fact here is that revenue growth was not correlated or only weakly correlated with higher returns. The only real metric to consider for tech was the P/S ratio.

So what did we learn?
With a general analysis (which I would like to caveat is only scratching the surface).

From here there is much more to look at. Next up I’ll be analyzing the balance sheets, cash flow and income statements across the same segments. After that I consider a lot of the low hanging fruit done we can look at management effectiveness. Some strategies I’m considering for this is:

I may reach the limit of what I can actually get data wise but we will see.

If you’re interested in the underlying data get in touch and I’ll share it.

Here are the market updates for Friday.