The analyst checklist

Before diving into any company, professionals work through a repeatable checklist so they cover the same ground every time and are not seduced by a single exciting number. Use this as the map for the rest of the track.

The five areas

1. The business model — how does the company actually make money, and is that way of making money easy to understand?
2. Revenue and its quality — is the company growing, and is the growth real, recurring and broad rather than one-off?
3. Profitability and the balance sheet — does it convert sales into profit and cash, and is it financed safely?
4. Management and governance — are the people running it competent, honest and aligned with shareholders?
5. The moat — is there a durable competitive advantage that protects all of the above from competitors?

Where to find the answers

Most of this lives in three documents the company is legally required to publish:

• The income statement (profit and loss) — revenue, costs, profit over a period.
• The balance sheet — what it owns and owes at a point in time.
• The cash-flow statement — the actual cash moving in and out.

Add the annual report and earnings-call commentary for the qualitative story, and the company's filings give you almost everything you need.

How to use the checklist

Treat it as a gate, not a scorecard to average. A serious weakness in any one area — vanishing cash flow, a dangerous debt load, untrustworthy management — can outweigh strength everywhere else. Work through all five before you form a view, and write down what you find. The discipline of completing the list is what stops a single good story from doing your thinking for you.