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.
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Youtube: Long Term Mindset
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