Concentric AB

STO:COIC

Backtesting is a powerful tool that simulates how a particular strategy or model would have performed on historical data. This process allows investors to evaluate the effectiveness of investment decisions based on past market data without risking actual capital.

1. Select Valuation Methods: Choose the valuation methods you believe best represent the true value of the stocks you're interested in.

2. Define Trading Criteria: Specify the buy/sell conditions based on the stock's valuation relative to its market price.

3. Run the Backtest: Initiate the process to see how your strategy would have performed historically.

4. Analyze Results: Review the outcomes to refine your investment strategies and improve future decision-making.

By leveraging historical data, backtesting provides a window into how investment strategies might perform under similar market conditions, offering invaluable insights for future investments.

Note: Past results don't guarantee future performance.

Free Cash Flow (FCF) is the money a company has left over after it pays for all its expenses and any investments it needs to make to keep the company running smoothly.

Think of it like your personal budget at home: after you pay for your necessities, like rent and groceries, and set aside money for future needs, like saving for a car or home repairs, the cash you have left is what you're free to spend or save as you wish.

It's a sign of a company's health and its ability to do things like grow its business, pay dividends to shareholders, or reduce debt.

Flexibility: Companies with more FCF can make big moves without having to borrow money or ask for more investment, giving them the freedom to grow or tackle new projects on their terms.

Rewards for Investors: When a company has extra cash, it can decide to give some back to its investors through dividends or by buying back shares, which can increase the value of the remaining shares.

A Healthy Sign: Regularly having more cash coming in than going out shows that a company is doing well, making smart decisions, and earning more than it spends.

Price return decomposition is a method of analyzing the factors that contribute to the changes in the market capitalization of a company.

The price return decomposition breaks down the market cap return into two main components: the change in the price-to-earnings (P/E) multiple and the change in company earnings (as well as the change in revenue and net margin).

The change in the P/E multiple reflects the effect of changes in investor expectations and sentiment towards the company. A higher P/E multiple means that investors are willing to pay more for each dollar of earnings, indicating higher expectations for future growth. Conversely, a lower P/E multiple indicates lower expectations.

The change in earnings, on the other hand, represents the actual changes in the company's earnings over the given period.

The change in revenue and net margin are two other factors that can impact a company's market cap. An increase in revenue indicates that the company is generating more sales, while an improvement in net margin indicates that the company is becoming more efficient and generating more profit from each dollar of sales.