US Stock Value Investing Analysis Framework

Use Cases

• Whether a particular US stock is worth buying/holding long-term
• Help me analyze a company's fundamentals
• How to interpret a company's financial report data
• Whether a company has an economic moat
• Help me screen stocks using value investing methods

Analysis Framework

4 Core Assessment Dimensions

Dimension 1: ROE Sustainability (Return on Equity)

[Company name] ROE history

[Company name/ticker] return on equity 3 year

• 3+ consecutive years ROE > 20% → ⭐⭐⭐ Excellent (3/3 points)
• 3+ consecutive years ROE > 15% → ⭐⭐ Good (2 points)
• ROE 10-15% or inconsistent → ⭐ Average (1 point)
• ROE < 10% or highly volatile → 0 points

• High leverage can artificially inflate ROE. If a company has high ROE but also high debt, take it with a grain of salt.
• Share buybacks reduce shareholders' equity, thereby "inflating" ROE. This needs to be evaluated alongside actual earnings growth.
• Cyclical industries (e.g., oil, semiconductors) will see ROE fluctuate significantly with industry cycles; a full cycle should be examined.

Dimension 2: Debt Safety (Debt-to-Equity / Debt Ratio)

• Debt-to-Asset Ratio = Total Liabilities / Total Assets. 50% means half of the company's assets are funded by debt.
• Debt-to-Equity Ratio = Total Liabilities / Shareholders' Equity. 1.0 means borrowings equal shareholders' investment.

[Company name] debt to equity ratio

[Company name/ticker] balance sheet debt

• Debt-to-asset ratio < 30% → ⭐⭐⭐ Excellent (3/3 points): Virtually no debt pressure
• Debt-to-asset ratio 30-50% → ⭐⭐ Good (2 points): Manageable debt
• Debt-to-asset ratio 50-70% → ⭐ Average (1 point): Debt repayment capacity needs monitoring
• Debt-to-asset ratio > 70% → 0 points: High leverage risk

• Banks and financial companies: Inherently high debt (since deposits count as liabilities), so the same standards don't apply. For banks, Tier 1 Capital Ratio is more appropriate; typically > 10% is considered healthy.
• Utilities and REITs: Generally have higher debt ratios; 50-60% is normal within the industry.
• Tech companies: Many quality tech companies have very low debt ratios or even net cash positions, which is a positive indicator.

Dimension 3: Free Cash Flow Quality (Free Cash Flow Quality)

[Company name] free cash flow

[Company name/ticker] cash flow statement

• FCF > 100% of net income → ⭐⭐⭐ Excellent (3/3 points): Cash flow exceeds profit, extremely high quality
• FCF > 80% of net income → ⭐⭐ Good (2 points): High-quality earnings
• FCF = 50-80% of net income → ⭐ Average (1 point): Notable gap, reasons need investigation
• FCF < 50% of net income or negative → 0 points: Earnings quality is questionable

• High-growth companies: Companies in rapid expansion phases like Amazon and Tesla have massive capital expenditures (building warehouses, factories), resulting in temporarily low FCF. This isn't necessarily bad, but you need to assess whether the investments will generate future returns.
• Mature companies: Mature companies like Coca-Cola and Procter & Gamble typically have FCF well above net income — a hallmark of quality "cash cows."
• One-time factors: Abnormally low FCF in a particular year could be due to a large acquisition or one-time investment; multi-year trends should be examined.

Dimension 4: Economic Moat Assessment (Economic Moat)

• Consumers are willing to pay a premium for the brand, even when cheaper alternatives exist
• Examples: Apple (iPhone premium), Hermes (luxury pricing power), Coca-Cola (global recognition)
• Search to verify:

  [Company name] brand value ranking

  or

  [Company name] pricing power

• The more users a product has, the more valuable it becomes, creating a positive "stronger with more use" feedback loop
• Examples: Visa/Mastercard (merchants and cardholders attract each other), Meta (social network), Microsoft Office (everyone uses it so you have to as well)
• Search to verify:

  [Company name] network effect

  or

  [Company name] user growth ecosystem

• Ability to offer products or services at significantly lower costs than competitors
• Examples: Walmart (bulk purchasing), TSMC (technology + scale barriers), Costco (membership model + optimized supply chain)
• Search to verify:

  [Company name] operating margin vs competitors

  or

  [Company name] cost advantage

• The cost for customers to change suppliers is high (time, money, learning curve)
• Examples: Salesforce (switching CRM systems is extremely painful for enterprises), Adobe (designer ecosystem dependency), Oracle (database migration costs)
• Search to verify:

  [Company name] customer retention rate

  or

  [Company name] switching costs

• Possesses 2+ types of strong moats → ⭐⭐⭐ Wide moat (3/3 points)
• Possesses 1 clear moat → ⭐⭐ Narrow moat (2 points)
• Has some competitive advantages but not obvious → ⭐ Weak (1 point)
• No obvious moat, intense industry competition → 0 points

Overall Rating Logic

Output Format

# 📊 [Company Name] ([Ticker]) Value Investing Analysis Report

**Date**: [Current date]
**Current Stock Price**: $[Price]

## 🔍 Four-Dimensional Assessment

### Dimension 1: ROE Sustainability
- Last 3 years ROE: [Year1]% → [Year2]% → [Year3]%
- Score: [X] / 3 ⭐
- Commentary: [One-sentence explanation]

### Dimension 2: Debt Safety
- Debt-to-asset ratio: [X]%
- Debt-to-equity ratio: [X]
- Score: [X] / 3 ⭐
- Commentary: [One-sentence explanation]

### Dimension 3: Free Cash Flow Quality
- Recent FCF: $[Amount]
- FCF / Net Income: [X]%
- Score: [X] / 3 ⭐
- Commentary: [One-sentence explanation]

### Dimension 4: Economic Moat Assessment
- Type: [Brand/Network Effect/Cost Advantage/Switching Costs]
- Score: [X] / 3 ⭐
- Commentary: [One-sentence explanation]

## 🏆 Overall Rating

**Total Score**: [X] / 12
**Rating**: [A / B / C / D]

## 💡 Investment Recommendation

[Provide recommendations based on the rating and specific circumstances, including:]
- Whether the stock is suitable for long-term holding by value investors
- Key strengths and risk factors
- If buying, reference range for reasonable valuation (incorporating PE/PS etc.)

## ⚠️ Limitations Disclaimer

- This framework focuses on the value investing perspective and is not applicable to pure growth stocks or cyclical stocks
- Financial data is based on historical performance and does not represent the future
- Moat assessment involves subjective judgment
- Macroeconomic environment and industry trends are not considered
- The above analysis is for reference only and does not constitute investment advice

Execution Steps

1. Confirm the analysis target: company name and ticker symbol
2. Search for the current stock price
3. Use web_search to look up the company's key financial data from the past 3 years (ROE, debt ratio, cash flow)
4. Search for analysis related to the company's competitive advantages and moat
5. Score each of the 4 dimensions individually
6. Sum up the scores to determine the overall rating
7. Generate the report using the output template
8. Attach data source links

Important Reminders

• Prioritize data from official company filings (10-K, 10-Q) or authoritative financial data platforms (Macrotrends, Simply Wall St, Finviz)
• If exact data cannot be found through search, analyst report data may be cited with source attribution
• For special industries (banks, REITs, utilities), explain the rationale for adjusted criteria in the report
• Moat assessment involves subjective judgment; sufficient supporting arguments should be provided
• All recommendations are for reference only and do not constitute investment advice