In this WealthLift Presentation, you will learn: What makes a company valuable? What’s the difference between a great company and a great stock? What are some other key indicators investors look at when valuing a specific stock? How do you find the information you need about companies? For more tutorials, go to: http://bit.ly/KfUaUf

1. Lesson 3: What makes a company valuable and what
makes a stock a "Buy"?
In this WealthLift video lesson, you will learn:
• What makes a company valuable?
• What’s the difference between a great company and a
great stock?
• What are some other key indicators investors look at
when valuing a specific stock?
• How do you find the information you need about
companies?
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.

2. Lesson 3: What makes a company valuable?
The Product
Dell Inc. (DELL) –
Computers and Computer Accessories
General Electric (GE) –
Aircraft Engines to Financial Products
Bank of America (BAC)
Banking & Financial Services
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.

3. Lesson 3: What makes a company valuable?
The Product
• Who buys the product? What could affect the
purchase of that product?
• What makes the product profitable for the
company?
• Scalability is important
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.

4. Lesson 3: What makes a company valuable?
Competitive Advantage
• Economies of Scale
• Branding
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.

5. Lesson 3: What makes a company valuable?
Company Assets
Tangible Assets
Intangible Assets
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.

6. Lesson 3: What makes a company valuable?
Company Assets
Net Assets Per Share = (Company Assets – Company Liabilities)
No. Shares Outstanding
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.

7. Lesson 3: What's the difference between a great
company and a great stock?
Earnings, or profits, add long term value to a
company.
Earnings Per Share = Company Earnings No. of Outstanding
Shares
Investors look at Earnings Per Share (EPS)
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.

8. Lesson 3: What's the difference between a great
company and a great stock?
• The EPS of a company is a extremely important to
investors
• If the company issues more stocks, each
shareholder owns a smaller part of the company, in
what is known as stock dilution.
• Investors look for a steadily rising EPS in
companies.
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.

9. Lesson 3: What's the difference between a great
company and a great stock?
Price-to-Earnings Ratio (PE)
Price-to-Earnings Ratio = Current Stock Price Earnings Per Share
(EPS)
Price-to-Earnings Ratio = $20 Stock Price $1 EPS
= PE Ratio of 20
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.

10. Lesson 3: What's the difference between a great
company and a great stock?
PE Ratio: 20.16 PE Ratio: 11.73
An investor pays $20.16 in Stock An investor pays $11.73 in Stock
Price for every $1 of Google Price for every $1 of Walmart
earnings earnings
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.

11. Lesson 3: What's the difference between a great
company and a great stock?
The price paid for a company is just as
important as the quality of the company
Rule of Thumb:
PE above 11 Market expects positive growth
PE at 11 Market expects zero growth
PE below 11 Market expects negative growth
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.

12. Lesson 3: What are some other key indicators
investors look at to value a company?
• The level of company debt, or liabilities, is very
important
• Debt accrues interest and increases chance of
bankruptcy
• Investors look at the Debt-to-Equity Ratio of a
company
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.

13. Lesson 3: What's the difference between a great
company and a great stock?
Debt-to-Equity Ratio
Equity = Company Assets – Company Liabilities
Debt-to-Equity Ratio = Company Debt Equity
Debt-to-Equity above 1 High Debt company
Debt-to-Equity between 0.5 and 1 Moderate Debt company
Debt-Equity below 0.5 Low debt company
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.

14. Lesson 3: How do you find the information you need
about companies?
• Annual and Quarterly reports of companies
• These reports are required by the Securities and
Exchange Commission (SEC)
• All reports are available online at the SEC Edgar
Database
• 10-K Annual Report is the most important
document released by a company
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.

15. Lesson 3: How do you find the information you need
about companies?
10-K Annual Report contains:
 Income Statement
Company revenues and expenses
 Cash Flow Statement
Company cash flows
 Balance Sheet
Company assets and liabilities
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.

16. Congratulations – Lesson 3 Completed
In the next WealthLift video lesson, you will learn:
• What is "Discounting”?
• How do I use discounting to find undervalued
stocks?
• What is a margin of safety?
Depictions of persons. product names and images modeled in this video are trademarks of their
respective owners who do not endorse and are not associated or affiliated with WealthLift Inc.
©2011 WealthLift Inc. All Rights Reserved.