#74 Stephen Penman: Financial Statement Analysis for Value Investing

31 snips

Aug 26, 2025

Stephen Penman, a renowned professor emeritus at Columbia Business School, brings his expertise in accounting and security analysis. He shares insights from his latest book that delves into how accounting supports investment evaluations. The conversation touches on the importance of patience in value investing, skepticism towards traditional valuation models, and the evolution of accounting practices, especially in light of climate change and AI's future impact. Penman also reflects on his own investment philosophy and offers valuable book recommendations.

Ask episode

AI Snips

Chapters

Books

Transcript

Episode notes

INSIGHT

Business First, Accounting Second

Value investing requires understanding the business first and the accounting second.
Accounting links measurements to valuation and must be used together with business insight.

ADVICE

Don't Penalize Investment As Negative Cash Flow

Avoid treating investments as negative cash flows like free cash flow does.
Put investments on the balance sheet and assess whether they create value through future earnings.

ADVICE

Use Practical Shortcuts — Then Verify

Use shortcuts but expand selectively; start with simple metrics then add accounting checks.
Always assess accounting quality before relying on summary ratios.

Get the Snipd Podcast app to discover more snips from this episode

Get the app