I have introduced Just five Fundamentals that will help you and I will be keep updating it if I find something that could make the description more clear.

I will explain some of the fundamentals that I should be learning and you can join and learn with me too:

1. P/E:

Price/earnings.

Price is the price of the stock. Say Planet Labs $PL at $25 and say it is a profitable company (It is not a profitable company as of writing this) and it’s TTM EPS is 2.

Which means it is trading at 25/2 =12.5 P/E

A great P/E but if you want to do a good judgement, the best thing is to compare the P/E with other competitors if there are any and also see what the growth rate of this company is with respect to competitors.

2. P/S:

Price/shares but I would use it as: Market cap /TTM revenue or sales

Say a company has a market cap of 10 Billion (10000 Million) and the revenue or sales of the company at TTM is 400 Million so the P/S is 10000/400 which equals: 25 p/s

Sometimes, you have to measure the p/s by the future guided revenue so you can calculate the p/s for 2027 revenue if you are in 2026.

P/S is mostly use for unprofitable companies.

3. GAAP Vs Non-GAAP

Ok, what does GAAP which stands for? It stands for: Generally Accepted Accounting Principles.

So, GAAP EPS is throughly audited and it is consistent across companies. There are some of the things that are not added to Non-GAAP EPS. The GAAP EPS will be lower than the Non-GAAP but this is not always true.

4. Free Cash Flow and Calculations of the FCF:

Free cash flow is cash left after the operating cost and funding the capital investment. Free cash flow is the money left for the company left to return.

Free Cash Flow = Cash flow from operations − Capital expenditures (Capex)

This is a simple calculation. You generate money from operation and then there are costs as well as tax. In other words, in most of the balance sheets, it is already mentioned. Another simple and a similar formula as above is:

Free cash flow = Operating Cash flow – Capex

5. ROIC and incremental ROIC

ROIC: Return on Invested Capital. Which means how much operating profit a company is making per dollar of capital tied to it.

ROIC = Operating profit after tax /invested capital

So, Return on invested capital is Operation profit after tax divided by Invested Capital and you get a percentage of the returns.