Welcome to the Investing for Beginners podcast. Today, we're joined by financial educator Brian Feroldi to discuss Warren Buffett's perspective on earnings per share. We'll explore why EPS might be overrated and dive into the importance of return on capital metrics for investors.

[00:01:14 ] Buffett's view: Earnings per share is overrated compared to return on capital.

[00:03:21 ] Four ways to measure return on capital: ROIC, ROE, ROA, and ROCE.

[00:07:03 ] Simple example: Million-dollar investment illustrates importance of return on capital.

[00:12:28 ] Discount rate discussion: 10% minimum for individual stock investments.

[00:17:30 ] Good return on capital ranges: 10-20% decent, over 20% excellent.

[00:20:22 ] Six phases of company growth, including optimizing for profitability.

[00:24:33 ] Alcoa example: Low return on capital correlates with poor stock performance.

[00:28:45 ] Amazon case study: Not yet fully optimized for profits, affecting return metrics.

Find more of Brian here:

Youtube: Long Term Mindset

X: Brian Feroldi

Instagram: Brian Feroldi

LinkedIn: Brian Feroldi

Today's show is sponsored by:

Go to shipstation.com and use code INVESTING to sign up for your FREE 60-day trial.

Go to monarchmoney.com/BEGINNERS for an extended 30 day free trial!

Get two hundred fifty dollars when you join Ramp. Go to ramp.com/BEGINNERS

Find great investments at Value Spotlight

Have questions? Send them to newsletter@einvestingforbeginners.com

Start learning how to value companies here:  DCF Demystified Link

SUBSCRIBE TO THE SHOW

Apple | Spotify | Google | Amazon | Tunein

Learn more about your ad choices. Visit megaphone.fm/adchoices