Jorge - as the other folks have suggested, this is a tough question. And, like most things financial, it all starts with what you are looking for....cashflow or appreciation.
If cashflow, you would be looking for how efficiently the business generates its revenue. A basic measure of this is EBITDA (earnings before interest, taxes, depreciation and amortation). It accounts for revenue, cost of goods sold, and the big black hole of general and administrative expenses. If you wanted to add back in all of the taxes, interest, etc., Net Income is all you need.
Of course, then the question is if the company is paying dividends..if not, no cash flow for you.
If appreciation is the goal, well it depends on the industry the business is in. If that segment is valued by cashflow (multiple of EBITDA), then the above remains front and center, but your analyis is how the business will improve its EBITDA. Some businesses will appreciate soley on revenue, so how will the business increase sales. I am sure there are additional metrics that others could list for you.
All of this gets us back to some basics:
The Business: does it make sense?
The Team: who is running the business and what is their experience?
The Revenue: there is no profit without the "potential" for profit, ie. Revenue/Gross Margin
The Analysis: P/L, Cashflow Analysis, and Balance Sheet
The Investment: What is the deal.."Is my investment being used to keep the lights on or to open new distribution channels? New and efficient manufacturing processes? What is the exit plan, etc.
If cashflow, you would be looking for how efficiently the business generates its revenue. A basic measure of this is EBITDA (earnings before interest, taxes, depreciation and amortation). It accounts for revenue, cost of goods sold, and the big black hole of general and administrative expenses. If you wanted to add back in all of the taxes, interest, etc., Net Income is all you need.
Of course, then the question is if the company is paying dividends..if not, no cash flow for you.
If appreciation is the goal, well it depends on the industry the business is in. If that segment is valued by cashflow (multiple of EBITDA), then the above remains front and center, but your analyis is how the business will improve its EBITDA. Some businesses will appreciate soley on revenue, so how will the business increase sales. I am sure there are additional metrics that others could list for you.
All of this gets us back to some basics:
The Business: does it make sense?
The Team: who is running the business and what is their experience?
The Revenue: there is no profit without the "potential" for profit, ie. Revenue/Gross Margin
The Analysis: P/L, Cashflow Analysis, and Balance Sheet
The Investment: What is the deal.."Is my investment being used to keep the lights on or to open new distribution channels? New and efficient manufacturing processes? What is the exit plan, etc.