Apple's margins and returns as a worked example
AAPL — Operating Margin, ROE, Revenue Growth. Open AAPL on the Ledge to see current values.
Five economic questions to ask about any company
| Question to Ask | Economic Concept | Where to Check |
|---|---|---|
| Can this company raise prices? | Elasticity / pricing power | Gross margin trends |
| What happens if revenue drops 20%? | Cost structure / operating leverage | Fixed vs variable cost mix |
| Is this industry attractive? | Market structure / competition | Number of players, margin spread |
| Does this company have a moat? | Barriers to entry / monopoly power | ROIC consistency over 5+ years |
| What could go wrong politically? | Externalities / regulation | ESG ratings, regulatory news |
Why the best analysts think like applied economists
The best stock analysts are applied economists. They do not just read financial statements. They understand the economic forces that determine whether those numbers will improve or deteriorate.
Running the five questions on a company you choose
Pick your favorite company. Run through the 5 questions in the table above using the Ticker view. Write your findings in the scratchpad.
How economics and financial data combine into conviction
Why a small cost edge can compound into a lasting advantage
An industry has 5 producers at similar scale, homogeneous product, commodity pricing. One producer has 2% cost advantage. Long-term implication for its stock?
Check your understanding
Sit with the ideas.
You analyze two companies. Company A: 70% gross margin, stable for 10 years, no close competitors, 25% ROE. Company B: 15% gross margin, declining over 5 years, many competitors, 8% ROE. Company B trades at a lower P/E. Which is the better investment?
Why: